Tata Motors plans Rs 7,500cr rights issue

MUMBAI: Weighed down by debt and losses in its India business, Tata Motors, the world's fourth largest truck maker, plans to raise up to Rs 7,500 crore via a rights issue over the coming months, its third such offering in the company's history since it got listed in 1955.

Cyrus Mistry-led Tata Motors will be approaching shareholders for their approval to allow the vehicle manufacturer to issue new equity shares to reduce its debt load, which stood at Rs 60,774 crore as on September 30, 2014. The rights issue will be for both ordinary and class A (commonly called DVRs or differential voting rights) shareholders. Through a rights offering, a company gives its existing shareholders new shares in proportion to their current holding. Such a fund-raising method also allows promoters to avoid diluting their stakes in the company. Tata Motors' promoters, including Tata Sons, hold about 34% in the maker of Nano and Jaguar cars, which currently has a market capitalization of Rs 1.63 lakh crore.

In case of under-subscription, Tata Motors' proposed rights issue will be mostly backed by the founders. The company's first rights offer came out in 2001 when convertible debentures were issued instead of equity shares. Subsequently in 2008, it introduced DVR shares through a rights offering, along with an issue for ordinary shares. During the second offering, its promoters picked up a significant share of the Rs 4,147 crore issue after Tata Motors share price fell well below the offer price, which also led its promoters hiking their stake in the automobile company.

In a statement to the bourses on Tuesday, Tata Motors said that the quantum, pricing and timing of the proposed rights issue will be decided later, depending upon the market conditions post shareholders' and other approvals. Tata Motors shares closed at Rs 605, up 2.9 % on the BSE while the benchmark sensex ended at 29,571 points, up 1%.

Tata Motors