Tata Motors plans Rs 3,000 cr mop-up
Hindustan Times — June 24, 2006

Tata Motors Ltd is in a mega expansion mode. The company, which is looking to build a cheaper car for the Indian middle class, is seeking shareholder approval to dilute stake by another 10 per cent to raise a maximum of Rs 3,000 crore. The investments would be in product development, capital expenditure in capacity enhancement, domestic and international acquisitions and mergers. The company is also seeking shareholder approval for raising its authorised capital limit to Rs 450 crore from Rs 410 crore at present. It has also raised its borrowing limit by Rs 2,500 crore.

The current paid-up capital of the company is Rs 383.03 crore with reserves in excess Rs 5,000 crore. Its total borrowings are a little less than Rs 3,000 crore. The company is also enhancing its borrowing limit from Rs 5,000 crore to Rs 7,500 crore. The resolutions will be placed before the shareholders at the annual general meeting on July 11, 2006. The explanatory statement for the notice to the annual report says that the company will invest Rs 10,000 crore over the next three to four years.

The investments would be in product development, capital expenditure in capacity enhancement, domestic and international acquisitions and mergers. Part of the investment will be financed through internal accruals but the rest of it will have to be raised through debt and equity. The explanatory statement to the notice says the money is likely to be raised through an equity-linked instrument in either India or abroad. It is likely that the company will raise the money through convertible bonds or warrants or even an ADR issue.

The possibility of a domestic market issue, though remote, cannot be ruled out. The company's board has also proposed a dividend of 130 per cent Rs 13 per share. Speaking about the coming year, Ratan Tata has said that the company will be launching quite a few models of commercial vehicles as well as passenger cars in both Indian and foreign markets. The company will also seek to do more in research and development for creating more fuel-efficient engines.

Tata said in his message to shareholders "Tata Motors, like other automobile companies, is exploring various new technologies to meet the new challenges, arising from spiralling energy costs." He has also stressed on emergence of the company as a global automobiles company and has said that it already assembles and sells 11 per cent of its total sales outside India and will increase it further.