Flexing its growing strength as a major worldwide auto maker and deals with European Union companies, India’s Tata Motors raised $750 million by issuing global depository receipts (GDRs) and convertible bonds to pay off debts incurred on acquiring the Jaguar and Land Rover brands, just ahead of releasing a new sedan with engines built by Italy’s Fiat. Tata Motors, which took over the loss-making United Kingdom icons of Jaguar and Land Rover from Ford Motor Company for $2.5 billion in 2008, said it intended to use the net proceeds of the securities offering to repay outstanding debt of $700 million. Tata Motors initially aimed to raise $600 million from the sale of the GDRs and bonds but raised the offering after meeting its target in less than an hour of opening, the release said.
Citigroup Global Markets, Credit Suisse and JP Morgan were joint bookrunners for the offering which would be listed on the Luxembourg Stock Exchange, the release said. “This transaction is a reaffirmation of investor confidence in the automotive sector,” company Vice Chairman Ravi Kant said. The offering would provide Tata Motors financial flexibility to pursue strategic goals, the release added.
A part of the amount raised will also be used for working capital needs and other capital expenditure. The Mumbai-based maker of the Nano - the world’s cheapest car - is raising funds to support the UK-based luxury unit whose sales have fallen sharply because of the global economic downturn. “Definitely the debt level would reduce, but it doesn’t make a substantial difference,” said Vaishali Jajoo, an auto analyst with Mumbai-based brokerage Angel Broking Ltd.
The Jaguar Land Rover division said  it had secured a loan of GBP 175 million (188.8 million euros) from the State Bank of India, taking to GBP 500 million (539.5 million euros) the level of new funding agreed so far this year. JLR said it was pleased at how funding plans were progressing after talks with the British government over a support package collapsed in August.
The funding so far this year has come from different sources, including facilities secured from Standard Chartered Bank, Bank of Baroda, and Burdale Financial Limited, a subsidiary of the Bank of Ireland. “We are pleased our funding plans are progressing and appreciate the confidence shown by our banking partners in our business,” said Kenneth Gregor, Jaguar Land Rover’s chief financial officer. JLR, which has been struggling with falling sales, recently announced that it would merge two of its three plants in Britain by 2014. The firm currently employs 14,500 people in Britain, after making 450 workers redundant earlier this year.
Tata said Land Rover is going ahead with plans to manufacture the striking new LRX compact offroad coupe, first shown as a concept at last year’s Detroit show. The Indian-owned automaker officially announced the plans at its Gaydon plant in England where the car will be designed and built. The LRX is designed to fill a niche market for compact, sporty SUVs. It is set to appeal to new customers in the luxury and offroad sector who want an eco-friendly package, said the company. The new car is expected to feature a hybrid drive combination of either petrol or diesel and electric propulsion.
The scaled-down offroader will make its debut next year at a time when industry experts expect new car buyers in western Europe to opt for downsizing, with a discernible trend towards more luxuriously-appointed smaller cars such as those in the Golf class. “LRX has unmistakable Land Rover design ... but it carries those essentials into a segment where the brand has never been before and with a proposed level of efficiency that would make it one of the cleanest vehicles in its class,” said Land Rover’s Managing Director Phil Popham.