Tata Motors plans $750-m DVR issue

    TATA Motors, India's largest truck and bus maker, plans to raise $700-750 million through issue of shares with differential voting rights (DVRs). The DVR share issue will be part of the company's plan to raise $1 billion (Rs 4700 crore) to retire debt. DVR shares will be issued with the same terms and conditions of the existing DVRs, two people familiar with the development said.
    "Tata Motors has not taken any decision. Any report, indicating any decision on the part of the company, is speculative. The automaker is still exploring all options for fund raising," said a company spokesperson. At the board meeting on June 28, 2010, the board, decided to seek shareholders' approval to raise about 4,700 crore through a combination of various securities.
    The fund raising is being considered at a point when the company is being nudged by some of the institutional shareholders to opt for a sponsored overseas issue for its DVR shares. These investors are unhappy about the discount in Tata Motors DVR shares to the normal shares. A sponsored share issue reduces the supply of shares in the domestic market, thereby boosting prices in times of demand. In a sponsored issue, the company does not issue fresh shares, but only facilitates the sale of shares from existing shareholders to new ones overseas. The shares tended by the existing holders are held by the depository and converted into depository receipts, that are listed overseas. Under the circumstances, a fresh DVR issuance may not go down well with institutional shareholders.
    On Wednesday, Tata Motors' DVR closed at 764.4, about 27% below the ordinary shares which ended at 1047.6. Globally, DVR shares trade at a 10-15% discount to ordinary shares as they have limited voting rights. DVRs are issued when a company wants to raise money but does not want to cede voting rights. Tata Motors DVR shares were listed in November 2008, and the share price has moved in a tight band since then.
    These DVR shares carry 1/10th of voting right of ordinary shares and give the shareholder 5% higher dividend as compared to ordinary shares. The last DVR issue in 2008 was done by the company at 305 about 10% less than the ordinary share price.