The Tatas will approach investors with a mega fund raising plan. Tata Motors is planning to raise around Rs 9,600 crore through three rights issues and an issue of securities in foreign markets to fund its acquisition of Jaguar-Land Rover (JLR).

The automobile giant will raise Rs 2,200 crore through a rights issue of equity shares and another Rs 2,000 crore through issue of ‘A’ equity shares carrying differential voting rights. A rights issue of 5-year 0.5 per cent convertible preference shares (CCPs) will raise 3,000 crore. The CCPs will be optionally convertible into ‘A’ equity shares after three years but before five years from the date of allotment. The differential voting rights issue will have one vote for every 10 ‘A’ equity shares.

On completion of these issues, the company will raise around Rs 2,400 crore through an issue of securities in foreign markets on terms to be decided at that time. Funds will be mainly used for financing the JLR acquisition through a wholly-owned subsidiary of Tata Motors in the UK. “The $2.3-billion deal is expected to be closed in June,” said Tata Motors MD Ravi Kant.

It is estimated that the total equity capital of the company would increase by 30-35 per cent through the rights issues in FY09. The incremental dividend on the increases capital would represent about 10 per cent of the company’s net profit for FY08. If the CCPs are converted between 2011 and 2013, the equity capital would then increase by 12 per cent at that time, depending on the conversion price. If not converted, the CCPs would be redeemed (with the back-ended premium) in 2013.

... contd.