Thursday August 21, 11:18 AM
Tata Motors shares up on smaller rights issue |
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MUMBAI (Reuters) - Shares in Tata Motors rose nearly 5 percent early on Thursday as investors cheered its decision to scrap a planned 30 billion rupee ($686 million) convertible preference share issue.
India's top vehicle maker said late on Wednesday it would cancel the issue due to weak stock markets, and instead raise funds by selling some investments over the next six to eight months, within the Tata group where possible.
It will now raise 42 billion rupees from two rights issues instead of 72 billion rupees from three simultaneous issues to help fund its $2.3 billion acquisition of the Jaguar and Land Rover luxury brands from Ford Motor Co.
"This is good as the extent of fund raising through an issue of shares that will result in a dilution of equity is less now," said Ashutosh Goel, an analyst at Edelweiss Securities.
"Instead, they are putting their investment book to good use by selling stakes, instead of just earning dividends from them," said Goel, who has a "buy" rating on Tata Motors stock.
Shares in Tata Motors, which had fallen more than a quarter since since May 29 when it announced the fund raising plan, rose as much as 4.7 percent in early trade and were up 3.5 percent at 439 rupees at 0501 GMT in a weak Mumbai market.
A volatile stock market has taken a toll on fund raising plans, with Jet Airways Ltd shelving a $400 million rights issue and Hindalco Industries revising its $1.2 billion rights issue to offer more rights shares than planned.
Tata Motors, which is scheduled to launch the ultra low-cost Nano car later this year, said in July it had sold 24 percent in an auto parts unit to a group firm for a profit of $27 million.
The company may now sell more stakes in component units such as HV Axles Ltd, HV Transmissions Ltd and TAL Manufacturing Solutions, Goel said, or sell its shareholding in Tata Steel Ltd which may net it about 20 billion rupees, Goel said.
"They may have got better valuations a few months back, but this will still be a better way to unlock value and raise money."
Smaller rival Mahindra & Mahindra Ltd recently said it would raise about 7 billion rupees by diluting a 3.7 percent stake to an arm of Goldman Sachs.
Funds raised through share sales in India in the first six months of 2008 fell by two-thirds from a year earlier to $5.85 billion, hurt by falling stock markets, Thomson Reuters data showed. The main share index is down 28 percent in 2008.
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