NEW DELHI: Tata Motors on Wednesday warned of “challenging times ahead” and announced raising of Rs 7,200 crore through three simultaneous but unlinked rights issues to fund its ambitious takeover of Jaguar and Land Rover marques from Ford.
In a first of its kind in the country, the company will introduce shares with differential voting rights, called “A” equity share, in the proposed rights issue to raise Rs 2,000 crore. In this, every 10 “A” equity shares will carry only one voting right. Merchant banker sources said as “A” equity shares will not carry the similar voting rights, it will be traded at discount to the other common shares having full voting rights.
Another Rs 2,200 crore will be raised through normal rights issue of shares, having full voting rights. In the third issue, which will also hit the market simultaneously, the company proposed to Rs 3,000 crore through a rights issue of 5-year 0.5% convertible preference shares (CCPs), which can be optionally converted into “A” equity shares after three years but before five years from the date of allotment.
In a statement, the company said, the precise terms and condition like ratio on which these securities would be offered, the offer price and the conversion price would be decided only when the issues are ready.
However, Tata Motors also indicated that the issues would raise the equity capital of the company by 30-35% during the current financial year. This means, in the first two category of rights issue, the company is likely to issue 11.5 crore to 13.5 crore shares. Out of this, around 5 crore to 6 crore shares with full voting rights, will be issued at around Rs 400 per share to raise Rs 2,200 crore. At the same time, 6 crore to 7 crore “A” equity share will be issued at around Rs 300 per share to raise Rs 2,000 crore.
As the company has announced Rs 15 per share as dividend, the cost of funds raised through “A” share will be around 5% only. The merchant banker said it is an efficient way of raising funds. “On completion of the above rights issues, it is also proposed to raise about $500/600 million through issue of securities in the foreign markets on terms to be decided at that time,” it said.
The company’s $2.3 billion acquisition of the two British brands is expected to be completed by the end of June. “Though the initial acquisition cost will be financed through bridging loans provided by a syndicate of banks, these loans would be fully repaid through the above-mentioned capital raising schemes,” it said.
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