Tata Sons to infuse Rs 6,500 cr into Tata Motors; equity investment aims at boosting investor confidence

The board of Tata Motors on Friday gave its approval for an equity infusion of Rs 6,500 crore from Tata Sons in a bid to increase the investors’ confidence in the company, said media reports.

The automaker will allot ordinary shares and warrants to the promoter in return. This is subject to shareholder approval.

The company would raise Rs 3,024.35 crore from Tata Sons through preferential allotment of 20,16,23,407 ordinary shares at a price of Rs 150 per share. It would raise another Rs 3,470 crore through issuance of 23,13,33,871 convertible warrants of Rs 150 per warrant, reported PTI.

The company further said its board has also in principle approved and authorised the raising of additional funds up to Rs 3,500 crore through external commercial borrowings and it will be used to refinance its existing debt.

This fund infusion is part of a Rs 10,000-crore fundraising process by Tata Motors in the aftermath of an erosion of the company’s market value and rating downgrades from global firms, said a report in Business Today.

After the allotment of equity shares and the conversion of warrants into equity, Tata Sons’ stake in Tata Motors will go up to 44 percent  from the current 35 percent, according to The Times of India.

The latest move of Tata Sons to infuse funds into Tata Motots will allow the latter to continue to invest and execute its long-term growth strategy, reduce debt and provide rating support for the company at “this pivotal juncture”, the report said citing a Tata Motors statement.

The total debt of Tata Motors is around Rs 50,000 crore, of which Rs 20,000 crore is in its stand-alone business, according to Mint citing statement of PB Balaji, group chief financial officer.

On Friday, Tata Motors reported a consolidated net loss of Rs 187.7 crore for the quarter ended 30 September, hit by subdued demand for its vehicles in the domestic market.

The company had posted a loss of Rs 1,009.49 crore in the same period of 2018-19.

Total revenue during the period under review stood at Rs 65,431.95 crore as against Rs 71,981.08 crore in the year-ago period, Tata Motors said in a regulatory filing.

However, British arm Jaguar Land Rover (JLR) reported a pre-tax profit of 156 million pounds, 246 million pounds better year-on-year, it added.

The British brand’s wholesales during the second quarter were up 2.9 percent at 1,34,489 units.

— With inputs from agencies