Tata Motors mulls $525-m share sale to institutions

New Delhi: The country\'s third largest carmaker Tata Motors is likely to launch a $525 million share sale to institutional investors to finance its investment initiatives and cut down on its debt. Industry sources said that the money would be used for product development.



Earlier in August, at the Society of Indian Automobile Manufacturers Association (SIAM) organised annual event Carl-Peter Forster, group CEO of Tata Motors had told reporters that the company would look to raise about $1 billion. "We hope to do it (raising funds) soon and as soon as we finalise on something, we will let you know," he had said.



Tata Motors, which had net debt of close to $4 billion on its books at the end of March 2010, has reduced its debt-to-equity ratio to 2.05 from 4 in March 2009. In 2009, the company raised $750 million through the issue of global depository shares and covertible notes, and paid off the entire outstanding debt incurred in its acquisition of the Jaguar and Land Rover (JLR) brands from Ford. It was reported earlier that the company may monetise investments in its subsidiaries and associate companies to raise cash in order to bring down its debts.



Currently, Tata Motors is looking to increase its passenger car portfolio. Top industry sources told FE that the company has started work to produce a 1-tonne plus diesel engine for the world's cheapest car Nano. Apart from that, the company is set to introduce an entry level hatchback which would bridge the gap between Indica and Nano. This car has been codenamed Dolphin.



In the financial year ending March 31, 2010, the company had a total investment portfolio valued at Rs 22,336.90 crore, up from Rs 12,968.13 crore as of March 31, 2009. The company had invested Rs 10,575.60 crore in equity and preference shares of TML Holdings (Pte), Singapore, which in turn prepaid the bridge loan taken for acquisition of JLR business.



During 2009-10 the company sold 6,33,862 vehicle registering a growth of 34% over the previous fiscal. Commercial vehicle sales were highest growing at 41% to 3,73,842 units. In the small car category Tata Motors increased its market share to 13.3% from 12.7% in the previous year.


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