Insiders say that $750 million of stock was sold by Tata Motors Ltd. to reduce debt after investors bid for more than three times the shares originally offered. The sources said that the share sale that began Oct. 1 was increased from $525 million due to the demand from institutional investors.
Bloomberg data show that Tata Motors, which owns Jaguar Land Rover, also raised $750 million a year ago selling convertible bonds and global depositary receipts to reduce debts that now total to about $4.5 billion.
In August, Standard & Poor’s raised its rating on Tata Motors’ debt as a result of the fundraising and an increase in luxury-vehicle sales along with the global economic recovery.
Mahantesh Sabarad, a Mumbai-based analyst at Fortune Equity Brokers (India) Ltd., describes the company’s balance sheet to be “much healthier today.”
Sabarad added that it’s possible that Tata won’t have to sell more shares after this issue as it will lead to cash flows that are “good enough” to create funds for debt repayment and capital expenditure.
Tata Motors has yet to comment on the share sale. The sources also said that the issue includes $550 million of so-called A shares with differential voting rights.
According to a statement to the Bombay Stock Exchange, Tata Motors had originally planned to sell $325 million of A-shares with an option to raise the offer in response to demand. Tata Motors said that it has also sold $200 million of ordinary shares. [via Bloomberg]