The Hindu Business Line : Tata Motors raising $450 m in global markets

Snapshot
No indication of the type of instrument to be issued.
Amount excludes sum that may be raised through `green shoe' option.
The company has since 2003 successfully concluded 4 intl FCCN offerings.

Mumbai June 20 Tata Motors said on Wednesday it would be raising $450 million (about Rs 1,800 crore) in the international market.

A committee of directors at its meeting held on Wednesday approved in principle the raising of additional long-term resources of $450 million, the company said in a notice to stock exchanges. The company also said that the amount excludes the sum that might be mobilised through a `green shoe' (a provision that allows a company to retain a portion of the excess subscription) option if the terms of the offer of capital permitted it.

The funds raised would go towards meeting the capital and product development expenditure related to company's growth projects in its commercial vehicle business unit and passenger car business unit, the company said.

The company did not, however, specify the nature of the instrument (debt/equity/hybrid of equity and debt) that would be issued but confined itself to merely saying that it would issue "appropriate securities" to raise the amount.

The company has since 2003 successfully concluded four international offerings of foreign currency convertible notes (FCCN) of which three were worth $500 million and the fourth (the most recent) was for Japanese Yen 11.76 billion.

Nearly all of the $200 million from its first two offerings have been fully converted into equity while the convertible notes from its third offering of $300 million and the fourth Japanese Yen 11.76 billion, are fully outstanding and are not due for redemption until March-April 2011.

Investor options

Investors however have the option to convert them into equity at the conversion price fixed at the time of the issue. Investors have the right to retain them as debt instruments, which would be redeemed at a premium to the issue price on the redemption date.

They have an incentive to remain as creditors while simultaneously retaining the right to convert these instruments into equity if the market price of the shares quote above the conversion price. At the National Stock Exchange, the Tata Motors scrip closed at Rs 686.40.

The conversion prices are ruling at a premium of 14 and 46 per cent respectively to the current market price

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