Tata Motors reworks JLR funding

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Tata Motors, India’s second-largest automotive company, on Wednesday said the current situation in the capital market has forced it to review plans to raise long-term funds amounting to Rs 7,200 crore for the $2.3-billion acquisition of Jaguar-Land Rover (JLR) from Ford Motor Co earlier this year.

With a view to keeping the increase in share capital as low as possible, the company’s board of directors decided to restrict the rights issue from the earlier three to only two simultaneous, but unlinked, securities: an issue of ordinary shares and an issue of ‘A’ ordinary shares with differential voting rights, as already announced.

Also, in place of issuing convertible preference shares, Tata Motors now proposes to raise the required resources by “monetising a part of the company’s investments through a phased divestment of certain investments (preferably as inter-group sales wherever feasible) at prevailing market prices over the next six to eight months.”

The funds released from such future divestments, together with those already sold during the current financial year, will form part of the resources to be raised to repay the bridge loan taken for the JLR acquisition, the company said in a late evening statement. The earlier announcement on the rights issues had led to disappointment in the stock market since there were fears about equity dilution. These steps, Tata Motors said, take into account “the current situation in the capital market and the change in the level of prices in the stock markets since May 2008.” Tata Motors stock closed at Rs 424.05 on the BSE on Wednesday, down 0.17%.