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Fund raising plans for JLR buy

MUMBAI: Tata Motors has announced the fund raising plans for financing its acquisition of Jaguar-Land Rover (through a wholly-owned subsidiary of Tata Motors in the U.K.). The acquisition is expected to be completed in the first quarter of the current year at a price of $2.3 billion. Though the initial acquisition cost will be financed through bridging loans provided by a syndicate of banks, these loans would be fully repaid through the capital raising schemes.

The company is planning to raise about Rs. 7,200 crore through three simultaneous but unlinked rights issues. The board of directors of the company at its meeting has also proposed that on completion of the rights issues, the company will raise a further $500-600 million through an appropriate issue of securities in the foreign markets on terms to be decided at that time.

The company will have a rights issue of equity shares up to Rs. 2,200 crore, a rights issue of ‘A’ equity shares carrying differential voting rights (one vote for every 10 ‘A’ equity shares) up to Rs. 2000 crore, a rights issue of five-year 0.5 per cent convertible preference shares (CCPs) up to Rs. 3,000 crore, optionally convertible into ‘A’ equity shares after three years but before five years from the date of allotment.

It is now estimated that the total equity capital of the company would increase by about 30-35 per cent through these issues during the current financial year. The incremental dividend on this increased capital would represent about 10 per cent of the company’s net profit for 2007-08. If the CCPs are converted between 2011 and 2013, the equity capital would then increase by only about 12 per cent at that time, depending on the conversion price and, if not converted, the CCPs would be redeemed (with the back-ended premium) in 2013.

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