High flying

Mumbai, April 20: Tata Motors today took its first big step in turbo-charging its ambitious Rs 6000-crore expansion drive by pricing a $400-million foreign currency convertible notes (FCCNs) at an attractive rate.

“We priced the bonds in Hong Kong late on Monday,” company executive director Praveen Kadle said about the largest Indian overseas debt offering so far.

“This is the first-ever multi-tranche convertible bond by an Indian company. The second tranche has the longest tenor of seven years and the highest conversion premium of 60 per cent for an Indian firm,” the company said.

The maximum equity dilution would be 6.4 per cent for Tata Motors’ owners — this will happen if all bonds were to be converted into shares. The dilution would be 2.1 per cent in the first lot and 4.3 per cent in the second.

The notes, as they are called, could be listed on the Singapore Stock Exchange. Analysts were upbeat on the prospects, saying the issue shows that the company had managed to bring down the cost of debt significantly — from around 6 per cent earlier to 3.5 per cent.

Money raised through the notes will be used to refinance the loan taken to acquire Daewoo’s commercial plant, in addition to augmenting production and to look for acquisitions abroad, Kadle said.

Investors will have the freedom to swap the notes for ordinary Tata Motors stock or global depository shares.

The first lot of notes worth $100 million will be converted at a price of Rs 573.106 per share, a 17.5 per cent premium on the Tata Motors’ BSE closing price on April 19. The second batch of $300 million will be exchanged at Rs 780.40 per share, a 60 per cent premium on the same day.

The first set of notes are zero-coupon bonds that can be redeemed at a discount of 4.89 per cent after five years; the second series offers 1 per cent interest and can be redeemed after seven years at a premium of 21.78 per cent. The company has the option to redeem the first tranche after a year, subject to relevant approvals.