Tata Motors alters cash route...

Tata Motors has dropped plans to raise Rs 3,000 crore through a rights issue of convertible preference shares.

The board of directors of the Rs 33,862-crore automobile giant decided today to raise the amount by divesting part of its Rs 4,910-crore investment portfolio. The stake sale will be made over a period of six to eight months, preferably through group transfers, but the company isn’t ruling out market sales.

The convertible preference share was one of the three simultaneous but unlinked rights issues that the company was planning to offer to its shareholders to raise Rs 7,200 crore and partly pay for the Jaguar-Land Rover buyout in March. Tata Motors was forced to rejig its plans because of the depressed market conditions.

The rights offers comprised an issue of ordinary shares of Rs 2,200 crore, an issue of “A” ordinary shares carrying differential voting rights (1 vote for every 10 shares held) of Rs 2,000 crore and an issue of 0.5 per cent five-year convertible preference shares for a total amount of Rs 3,000 crore.

The preference shares were to be converted into “A” shares at any time after three years but before five years from the date of allotment.

In a late evening announcement, Tata Motors said the board decided to restrict the rights issue to two simultaneous but unlinked securities. The company was keen to restrict the increase in its share capital which is pegged at Rs 3855.04 crore. The promoters currently hold 33.40 per cent.

“Taking into account the current situation in the capital market and the change in the level of prices in the stock markets since May, the board of directors reviewed the earlier fund raising proposal,” Tata Motors said.

Tata Motors biggest investment is in Tata Motors Finance – its vehicle financing arm – at Rs 1,150 crore followed by Fiat India Automobiles (Rs 601.59 crore), Tata Steel (Rs 395.73 crore) and Tata Daewoo Commercial Vehicles Co Ltd (Rs 245.41 crore). It has Rs 22.5 crore investment in Haldia Petrochemicals.

It also has investments in HV Axles Ltd, HV Transmission, Tata Technologies Ltd, Telco Construction Equipment Ltd, Tata Industries, Rallis and Tata Sons.

The market has been abuzz with talk that Tata Motors may divest a part of its stake in HV Axles and HV Transmission to strategic partners.

After clinching the Jaguar Land Rover deal, Tata Motors chief financial officer C. Ramakrishnan said the company was looking at unlocking value from its holdings in subsidiary companies through stake sales. “Tata Motors is also putting in place a disinvestment programme, unlocking value from some of our investments in various subsidiaries…That plan is getting finalised,” he had said then.