Tata Motors to pay back entire JLR loan

Oct 10 2009, 00:46 IST
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SummaryTata Motors on Friday raised $750 million (around Rs 3,480 crore) in a jiffy from the global markets, through an issue of global depository shares and convertible bonds to fully pay up the loan it had taken to buy Jaguar Land Rover.

Tata Motors on Friday raised $750 million (around Rs 3,480 crore) in a jiffy from the global markets, through an issue of global depository shares and convertible bonds to fully pay up the loan it had taken to buy Jaguar Land Rover. The response from the investors was strong enough to make the company raise the size of the offering by $150 million from the planned $600 million. The offerings were lapped up within an hour.

The company had taken a loan of $3 billion to acquire Jaguar Land Rover in June last year. For quite some time, Tata Motors has been planning to raise funds from the international markets to service the bridge loan it had taken to buy JLR in June last year. But it was forced to postpone the plan because of the global recession. Tata Motors has now joined a growing list of Indian companies that have taken advantage of the recent market buoyancy to raise funds. Excluding Tata Motors, Indian firms have raised almost $17 billion in equity this year so far---about three times what they did during the same period last year.

According to C Ramakrishnan, chief financial officer, Tata Motors, with the $750 million raised on Thursday, the loan taken for the acquisition of JLR would have been fully repaid.

After the issue, the total promoters’ equity in the company stands at 24.3%. Stock markets reacted sharply to the news with the shares of the company plunging 6.66% to end at Rs 548.30 on Friday on the Bombay Stock Exchange (BSE). But Tata Motors vice-chairman Ravi Kant said Thursday’s “offer was a significant milestone (for Tata Motors) and bears testimony to the trust reposed in the long-term outlook and performance” of the company. The GDRs will be listed in the Luxembourg exchange. Citigroup Global Markets, Credit Suisse and JP Morgan were the book runners for the issue.

Ivan Palacios, assistant vice president–analyst, corporate finance group, Moody’s Singapore Pte, said, “By pre-paying the remaining balance of the JLR bridge loan, Tata Motors will significantly reduce its refinancing risk. In addition, the company will no longer be restricted by the maintenance covenants included in this facility.” He, however, added that there has been no immediate positive impact on the company’s rating (B3 corporate family rating) given that its leverage levels remain high.

However, Tata Motor’s overall debt remains bloated. Says, Mahatesh Sabarad, a Mumbai-based analyst with Centrum Broking, “Old debt

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