• Media (Bloomberg) reports that Tata Motors is likely to launch a $525
million share sale to institutional investors – in order to de leverage its
balance sheet.
• The company will likely offer $200 million of ordinary shares and
$325 million of 'A' shares, with an option to increase the 'A' shares sale
to up to $400 million through a Qualified Institutional Placement. Tata
Motors intends to price the shares at a 4-5% discount to their current
price.
• The company currently has gross debt of Rs353B as of FY10, (which
includes vehicle finance debt of c. Rs.70B). While the OEM's cash
flow from operations have improved considerably, given a sharp uptick
in the profitability at JLR, management is keen to reduce debt levels
given that the gearing ratio currently stands at c.4x.
• Management has already taken shareholder approval earlier in the year
to raise funds via ordinary shares, ‘A shares’ or any other equity linked
instruments.
• Our View: Tata Motors has been steadily deleveraging its balance
sheet via a combination of measures - stake sale in subsidiaries, fund
raising initiatives, and the company has also benefited from improving
operating cash flows. Thus, the current initiative to raise funds will
strengthen the capital structure of the OEM. We expect the gearing
levels to reduce to below 1.5x by FY12E (compared to 4x currently).
No comments:
Post a Comment