Tata Motors shares slip, may sell stakes in units
Saturday, 27 September 2008

REUTERS, MUMBAI- Shares in Tata Motors Ltd fell nearly 5 percent on Friday ahead of the opening of its 41.5-billion-rupee ($892 million) rights issue, with concerns that turbulent markets may hit its fund raising plans.

The offering by India's top vehicle maker, which was pared down from a planned 72 billion rupees, is scheduled to open on Monday.
 
"The state of the overall market is a concern," said Huzaifa Suratwala, automotive analyst at IL&FS Investsmart.
 
The benchmark index, tracking turbulent global markets, has shed about a third of its value so far this year and was down 2.4 percent at 0933 GMT.
 
Tata Motors shares were down 3.4 percent at 371.10 rupees, at near four-year lows, felled by its fund-raising plans and a grim outlook for the commercial vehicles sector, where demand has slowed on high fuel prices and rising interest rates.
 
"There are also concerns about how Jaguar and Land Rover will affect profitability and the cost overruns on Nano," said Suratwala, who has a "hold" rating on Tata Motors stock.
 
Tata Motors, which has said it will launch the ultra low-cost Nano car around October, earlier this month suspended work at the factory in eastern India after violent protests, and has said it was looking at alternate locations to make the car.
 
The proceeds from the rights issue, which closes on Oct. 20, will be used to make an early repayment on some of the short-term funding for its $2.3 billion acquisition of Jaguar and Land Rover earlier this year.
 
A $3 billion bridge loan, it had taken, expires in June 2009.
 
Tata Motors has also said it was looking to sell stakes in some units to fund the deal, and analysts have said such a plan was preferable to the equity dilution the rights issue entails.
 
On Thursday, it sold 1.3 percent in group firm Tata Steel for 4.86 billion rupees, Bombay Stock Exchange data showed.
 
The Economic Times, citing bankers close to the development, said on Friday Tata Motors was in talks with private equity funds to sell stakes in six unlisted units to raise 30 billion rupees.
 
The Tata Motors rights issue opens a week after Hindalco Industries, India's leading aluminium maker, launched its 50.5-billion-rupee rights issue to a lukewarm response.
 
On Thursday wind turbine maker Suzlon Energy Ltd said it would consider raising up to 18 billion rupees in a rights issue. Its shares fell to two-year lows on Friday.
 
Still, some analysts expect Tata Motors' rights issue will find enthusiastic takers.
 
"You know exactly what the money is for, and long-term prospects are good," said Sandeep Shenoy, strategist at PINC Research.
 
"The issue will sail through quite easily... the shares are just caught in the cross-fire of the market."
 
JM Financial, ICICI Securities, Citigroup and JP Morgan are lead managers to the issue.
 
Indian companies have raised about $4.8 billion from rights issues until mid-August, Thomson Reuters data showed.

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