NaAtMaD – News and Articles that Make a Difference

News, Articles, Announcements, Reports related to Indian Economics and Corporate World

Tata Motors rights issue opens, shares fall

Posted by Yogesh on Monday, 29 September, 2008

MUMBAI, Sept 29 (Reuters) – Shares in India’s Tata Motors fell as much as 6.6 percent as volatile markets raised concerns that investors may stay away from its 41.5 billion-rupee ($885 million) rights issues, which opened on Monday.

At 0752 GMT, Tata Motors shares were down 5.3 percent at 353.40 rupees, just above a more-than-four-year low of 339 rupees hit earlier this month. The benchmark stock index , which has lost more than a third of its value so far this year, fell more than 4 percent on the day.

“There are no new concerns, but the overall market sentiment is very poor,” said Sandep Shenoy, a strategist at PINC Research, who expects investors may wait for a week or two for the market to settle before subscribing to the rights issue.

Shares in India’s top vehicle maker have taken a hit on the company’s fund-raising plans and a grim outlook for the commercial vehicles sector, where demand has slowed on high fuel prices and rising interest rates.

Tata Motors has also said it was looking to sell stakes in some units to fund the deal, and analysts have said such a plan was preferable to the equity dilution the rights issues entail.

The two simultaneous but unlinked rights offerings, which were pared down from a planned three issues worth 72 billion rupees, closes Oct. 20.

The company is offering one ordinary share at 340 rupees for every six held to raise to raise 21.9 billion rupees. It is also offering one ‘A’ ordinary share, which has different voting and dividend rights, at 305 rupees, for every six shares held.

The proceeds will go toward early repayment on some of the short-term funding for its $2.3 billion acquisition of Jaguar and Land Rover earlier this year. A $3 billion bridge loan taken for the deal expires in June 2009.

Higher borrowing costs have encouraged several Indian firms to opt for rights issues in 2008, raising about $4.8 billion till mid-August, Thomson Reuters data showed, but volatile markets have been a dampener.

Top aluminium maker Hindalco Industries Ltd last week launched a 50.5 billion rupee rights issue, to which response has been tepid, traders said. Its shares were down 2.7 percent at 96.45 rupees on Monday, their lowest level in more than three years, and just above the issue price of 96 rupees.

Wind turbine maker Suzlon Energy Ltd said on Monday it would set the terms of a rights issue to raise up to 18 billion rupees in four to five weeks, and its shares fell more than 9 percent to their lowest in more than two years.

Still, bankers to the Tata Motors issue remained confident.

“It is too early to tell, but investor response has been encouraging, and given its brand name and track record, it is expected to do well,” said one banker who asked not to be named.

Another banker said they expected the bulk of the subscriptions to come in toward the closing date of the issues.

JM Financial, ICICI Securities, Citigroup and JP Morgan are lead managers to the issues. Source Reuters

Advertisements

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

 
%d bloggers like this: