The funds, which may be raised either in the local or international markets, will be used to pare the debt of Indias biggest truck and bus maker and also finance its growth plans.
The Tata Motors board has also decided to seek shareholders approval to increase the firms borrowing limit to Rs 30,000 crore from the current Rs 20,000 crore. The company proposes to mop up the money through a variety of instruments including shares, debentures, convertible bonds, warrants either in one or more tranches. The Tata Motors stock closed at Rs 787.50 on Monday, up 2.35% on the Bombay Stock Exchange even as the Sensex gained 1.14% to close at 17,774.26. Currently, the firms debt-equity ratio stands at an estimated 2.5:1 from a relatively high of 4:1 at the end of December 2009. The company has managed to reduce its consolidated debt to around Rs 23,000 crore (excluding TML
Finance) over the last 12-15 months from Rs 30,000 crore at the end of March 2009. The debt has been brought down through several measures such as an early conversion of foreign currency convertible bonds, a rights issue and some stake sales in companies.
Analysts have been anticipating an equity dilution for some time now, since the company is aiming to bring down the debt equity ratio to 1:1. In 2008, the Tata-owned firm had bought British brands Jaguar and Land Rover for $2.3 billion, for which it had borrowed close to $3 billion. While JLR was initially a drag on the company, the business has since turned around on strong volumes and cost cutting initiatives.