Tata Motors may sell stakes in group cos to raise funds

MUMBAI: The possible avenues through which Tata Motors could raise Rs 3,000 crore to bridge the gap between the old and revised rights issue structure, include selling of shares in group Tata companies, both listed and unlisted.

Some of them include Tata Steel, in which Tata Motors held 3.14 crore shares at the end of FY08, which is currently valued at nearly Rs 1,840 crore, coupled with partial dilutions in Tata Motor’s subsidiaries like Korea-based Tata Daewoo Commercial Vehicle and Tata Technologies, point out investment banking sources.

Tata Daewoo’s total income for the year ended March 31, 2008 was Rs 3,069.7 crore while its profit after tax was Rs 158.9 crore. Other immediate liquid assets available to Tata Motors, include its cash and bank balance of Rs 2,397.3 crore at the end of FY08.

Of course, the revised terms of the rights issue will only result in a 42% dilution of the company’s paid-up equity capital of Rs 386 crore, as compared to earlier estimates of 57%, point out analysts at foreign brokerage houses. Tata Motors’ fully diluted earnings per share was Rs 48.28 for FY08.

Tata Motors currently has 85% shareholding in HV Transmissions and HV Axles each. In the past two quarters the company has been diluting stakes in these two companies. HV Transmissions and HV Axles are valued at Rs 1,100 crore.

Incidentally, the Tata group had earlier planned to dilute equity in some of the subsidiaries like Tata Daewoo, HV Axles and HV Transmissions through an IPO. An auto analyst pointed out that since the market is on a downturn, and it would be difficult to get a good price, the main holding company Tata Sons will initially fund. Nevertheless, the Tata Motors stock declined 1.4% to Rs 417.95 on Thursday, given the bearish sentiment on the Street.

In the changed structure Tata Motors has decided to sell certain investments instead of its earlier plan of raising Rs 3,000 crore through issue of the convertible preference shares, one of three instruments of the proposed rights issue. However, other two instruments — issue of ordinary equity shares and offer of equity shares with differential voting rights — amounts to Rs 4,200 crore.

The proceeds of the divestment will be utilised for repayment of the bridge loan taken for JLR acquisition. The company has already monetised some of its investments in this year.

Tata Motors purchased JLR from Ford Motor for $2.3 billion in January. In May this year it announced plans to raise Rs 7,200 crore through the unlinked but simultaneous rights issue. The company also announced to raise between Rs 2,000 crore and Rs 2,500 crore ($500-600 million) from overseas markets through issue of securities. In all, the company plans to raise a total of Rs 9,500 crore to fund the JLR deal.
thanks to :- economictimes.indiatimes.com