Tata Motors to raise Rs4,700 crore for expansion and debt reduction

Tata Motors plans to raise Rs4,700 ($1 billion) via equity and equity-linked instruments. The funds will be raised via issue of shares, bonds, warrants and will go towards expansion and to reduction of debt.

The board of directors at its meeting on Monday, inter alia, decided to seek shareholders' approval through a postal ballot for raising funds equivalent to about Rs4,700 crore through a combination of issue of ordinary shares, 'A' ordinary shares, convertible bonds, debentures, warrants or other equity linked instruments in the domestic and/or international markets in one or more tranches," the company said in a web site announcement.

The fund so raised will be used for meeting the company's growth plans as well as for reducing the debt on its balance sheet.

The timing and structure of the issues will be decided depending upon market conditions post shareholders' and other approvals, it said.

The board also will seek shareholders' approval for raising the limits for borrowings and for creation of security on the company's properties from Rs20,000 crore to Rs30,000 crore, it added.

Tata Motors shares were down in early deals on fears of equity dilution and a consequent fall in earnings per share.

According to analysts though the move may be good for the company in the long term as it would reduce debt, the immediate impact on investor sentiment is however, equity dilution and lower earnings per share.

According to analysts' estimates, the funds raised would lead to dilution of equity by about 10 to 12 per cent.