Tata Motors to Raise $700M - Analyst Blog

News has leaked that Indian auto giant, Tata Motors Ltd. (TTM), will raise $700 million by selling shares with differential voting rights. The automaker intends to utilize the funds to repay debt and expand its operations.

In June, the company’s board sought shareholders’ approval to raise funds equivalent to Rs.47 billion ($1 billion) through ordinary shares, ‘A’ ordinary shares, convertible bonds, debentures, warrants and other equity-linked instruments in either the domestic or the overseas markets. In a filing to exchanges at the beginning of this month, the company has revealed that it received the approval of shareholders to raise additional long-term resources.

Raising funds by issuing shares has become frequent with the company. In October last year, the company raised $750 million by selling global depositary shares and convertible notes in order to repay debt for acquiring Jaguar and Land Rover from Ford Motor Co. (F). It paid $2.3 billion to acquire the brands in March 2008. As of Jun 30, 2010, the company had a consolidated debt of Rs.199.8 billion ($4.3 billion).

Tata also intends to use the funds to expand its operations as well as and develop its products. The company will conduct research and development activities on new car models and plans to set up satellite plants at various locations to assemble its minicar, Nano.

Tata posted a profit of Rs.19.9 billion ($432 million) during the first quarter of its fiscal year ended Jun 30, 2010 in sharp contrast to a loss of Rs.3.3 billion ($71 million) in the prior-year quarter. This is equivalent to the earnings per share of Rs.34.80 (76 cents) during the quarter against a loss of Rs.6.40 (14 cents) a year ago.

Sales volume for the quarter surged 49% to 190,304 vehicles globally. Consequently, revenues soared 64% to Rs.270.6 billion ($5.9 billion). Jaguar and Land Rover showed a profit before tax of Rs.15.9 billion ($345 million). This was attributable to an increase in sales volumes, massive restructuring programs after its acquisition and favorable currency translation effects.

Tata Motors, a Zacks #3 Rank (Hold) stock, designs, develops, manufactures and sells passenger cars, light commercial vehicles, engines for industrial and marine applications; construction equipment as well as provides engineering solutions and software consultancy and services and financing for its vehicles. Its products are marketed in Africa, Australia, Europe, Middle East, Southeast Asia and south Asia.
 
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