Tata Motors Ltd., India's largest automaker by sales, Monday hiked the size of its institutional share sale to $750 million from $525 million, aided by robust demand for its shares amidst buoyant global markets.
"In view of the response received, the committee of directors today authorized that the size of the offering of the 'A' ordinary shares to be increased from $400 million to $550 million," the company said in a filing to the Bombay Stock Exchange.
The automaker Friday opened its share sale, which comprised $200 million of ordinary shares and $325 million of the A class of ordinary shares, with an option to increase the A class of ordinary shares to $400 million.
An investment banker involved in the share sale, who didn't wish to be named, said demand was robust and had topped $1.9 billion so far.
Tata Motors intends to use the proceeds primarily to cut debt and for capital expenditure, long-term working capital requirements, growth objectives and other general corporate purposes, the company said Friday.
The common stock was being sold at 1,074 rupees ($24.2), the shares with differential voting rights were being sold at 764 rupees apiece, two people familiar with the matter had told Dow Jones Newswires when the issue opened Friday. They didn't want to be named as they were not authorized to speak to the media.
This was at a 4.2% and a 46.4% discount to Friday's closing price of 1,118.85 rupees. Monday, the company's shares were up 1.4% at 1,134 rupees, outperforming the 0.8% rise in the benchmark Sensex to 20,603.34.
Shares with differential voting rights are usually issued to protect the stake of founders in a company, though they can also be used to raise capital. Such shares allow a company to dilute its equity without matching dilution in the promoters' stake. Investors who subscribe to such shares receive higher dividends, but have to surrender their voting rights in return.
The company, part of the salt-to-software Tata Group, said June 28 that its board approved seeking shareholders' approval to raise funds equivalent to about 47 billion rupees through ordinary shares, 'A' ordinary shares, convertible bonds, debentures, warrants and other equity-linked instruments in either the domestic or the overseas markets, or both, in one or more tranches.
In an Aug. 10 filing to the exchanges the company said it received the approval of shareholders to raise additional long-term resources.
Analysts expect Tata Motors to use the funds raised to mainly restructure debt. It had a consolidated debt of 199.83 billion rupees as of June 30.
Tata Motors has been raising funds to repay its debt. The Indian company in October 2009 raised $750 million by selling global depositary shares and convertible notes to repay debt taken to acquire the two luxury car brands, Jaguar and Land Rover, from Ford Motor Co. It paid $2.3 billion to acquire the brands in March 2008.
The company is also looking to expand operations.
Analysts say it is keen on conducting research and development work on new car models, besides setting up satellite plants to make its Nano minicar.
Tata Motors currently makes the Nano at its Sanand facility in the western state of Gujarat and at Pantnagar in northern Uttarakhand state. The company previously said it wants to set up smaller plants at several locations to assemble the minicar.
Citigroup Global Markets India Pvt. Ltd. and Credit Suisse Securities (India) Pvt. Ltd. are acting as the book running lead managers for the offering, Tata Motors said.
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