Tata Motors Ltd. is planning to generate up to INR75 billion ($1.2 billion) in a rights offer to increase its capital. In an exchange filing, Tata said that it is offering six shares for every 109 held at INR450 each, representing a 15-percent discount to the closing price Tuesday last week. Those who hold so-called differential voting rights will be offered stock in the same proportion at INR271 each.
According to Tata, it would invest around INR40 billion annually at its Indian operations in the next two to three years, and up to GBP3.7 billion ($5.5 billion) annually over the same period at Jaguar Land Rover on product development and expansion.
Piyush Jain, an analyst at Morningstar Investment Adviser (India) Pvt., wrote in a note that Tata priced the share issue “conservatively,” saying that the higher dilution relative to expectations is not materially significant to cause any change in their fair value estimate of INR700 per share.
Tata’s board also green-lighted a repurchase of non-convertible debentures valued at INR12.5 billion. Indian companies have been attracting investors as its economy is seen to grow at a faster pace as Prime Minister Narendra Modi moves to secure foreign investment, reduce red tape and boost infrastructure spending.
Tata Motors’s Indian operations have logged losses in six of the past nine quarters, no thanks to slow sales of its trucks and passenger cars. To boost demand, Tata launched the new Bolt hatchback in January and the Zest sedan in August. It will unveil two new passenger vehicles every year through the end of the decade.
The carmaker saw sales of its passenger vehicles in India drop 21 percent in the 11 months ending February. On the other hand, overall demand for passenger vehicles in India grew 4 percent industry-wide in the period. For the year commencing April 1, the Society of Indian Automobile Manufacturers expects demand to surge up to 8 percent.