Tata Motors raises $750 million to pay down debt taken to buy Jaguar Land Rover

Article by Christian Andrei, on August 26, 2010

Tata Motors Ltd.'s decision to acquire Jaguar and Land Rover last year continues to haunt it but there appears to be relief in sight. Tata Motors raised $750 million by issuing global depositary receipts and convertible bonds to pay down debt from the $2.5 billion acquisition.

At the end of June, Tata Motors recorded a consolidated debt of about 240 billion rupees ($5.2 billion), says Autonews.

Tata Motors shares dropped as much as 5.5% on Friday to 555.25 rupees, underperforming a 0.4% drop on the benchmark Sensex index. A term sheet had stated the price of the new GDRs was equivalent to 580.35 rupees per common share.

Standard & Poor's analyst Suzanne Smith considers the development as very positive for the company. She added, But it all depends on ... whether it would be entirely used to reduce the debt.

Tata Motors said that the proceeds would repay the debt for the Jaguar Land Rover purchase and go toward capital expenditure, working capital and general corporate purposes.

Earlier, Tata Motors had pegged the amount to be raised at $600 million through the sale of GDRs and convertible bonds. After getting strong investor demand, it then chose to go higher for the fundraising.

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