Tata Motors intends to raise Rs 4,000 crore (USD1bn) through the issue of long-term securities in a move seen as bolstering its war chest for a planned acquisition of UK-based carmakers Jaguar and Land Rover from Ford.
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The FT reported that it is also trying to tap international markets for about USD3bn in loans in preparation for the acquisition, which people familiar with the deal expect to be agreed in principle this month.
The board of directors at its meeting held on Tuesday approved the proposal, the company said in a statement to the stock exchanges later in the day. The funds, which would be raised in India and overseas in one or more tranches, will be for the company’s expansion in India and abroad and for strategic acquisitions and alliances.
Tata shares lost value on the news and concern at the scale of the comapny’s debts.
However, “Going forward, this [debt] would put certain stress on the company,” an analyst told The Hindu newspaper. “The benefit of the expansion wouldn’t accrue in one year. That means, the profit won’t be commensurate with the upfront interest cost burden.”
