Mumbai, May 3: Goldman Sachs will pick up close to 3.68 per cent in Mahindra & Mahindra (M&M) for Rs 700 crore.

Under the deal, M&M will issue unsecured fully and compulsorily convertible debentures (FCD) to Golboot Holding, a Goldman Sachs entity. The proceeds from the issue will be used in the expansion of the company’s auto and tractor businesses.

At a board meeting held today, M&M directors approved a proposal to raise additional resources, the company informed stock exchanges.

M&M will issue 93.95 lakh unsecured fully and compulsorily convertible debentures (FCD) at a face value of Rs 745 each, aggregating to little over Rs 700 crore.

Each FCD, which carries an interest rate of 9.25 per cent, will be converted into one equity share of Rs 10 each at a price of Rs 745, including a premium of Rs 735, anytime within 18 months from the date of allotment at the option of an investor.

The issue price is at a premium of 7.91 per cent to the M&M closing price of Rs 690.35 on the Bombay Stock Exchange on May 2.

With this investment, Golboot Holding will own 3.68 per cent of the post-issue paid-up equity capital of the company.

Kotak Mahindra Capital Company Ltd was the exclusive financial adviser for the transaction.

According to analysts, M&M took the FCD route to raise funds because credit has become tight and cost of borrowing has risen even for highly rated companies.

Mahindra and Mahindra has lined up aggressive plans for expansion. It is investing Rs 4,000 crore in a plant near Pune. This will double its overall capacity of medium and heavy commercial vehicles to 6 lakh units.

In utility vehicles, the company is expected to roll out the Ingenio in the second half of this fiscal.

The Mahindras have also been chasing the inorganic route, particularly in components, for growth.

After acquiring European companies, it had joined hands with ICICI Ventures to buy Italian gear maker Metalcastello for an undisclosed sum. In tractors, M&M is planning a slew of rollouts. The company recently launched a network that will sell and service used cars.