TATA MOTORS SELLS $750M IN STOCK TO REDUCE DEBT

TATA MOTORS SELLS $750M IN STOCK TO REDUCE DEBT

By Mark Kleis

The ambitious Indian automaker, Tata Motors, has announced it will sell shares of stock worth $750 million - the proceeds from which will be utilized to help pay down some of the $4.5 billion in debt the automaker owns.

Although $750 million may be a far cry from the tens of billions being discussed for General Motors' upcoming IPO, this sale, for starters, is not an IPO, only an isolated release of shares. Secondly, as Bloomberg points out, it is a significant amount because the automaker has originally announced intentions to sell $525 million worth, but higher than expected demand drove Tata to increase the bid.

The strong demand for Tata shares can only be taken as a positive sign, as investors have voiced increased faith in the automaker's ability to turn a profit from the Jaguar Land Rover firms, something Ford struggled to do.

The sale of the stock, which began October 1, has already prompted some analysts to note the noteworthy improvement in the balance sheet, including Mahantesh Sabarad of Fortune Equity Brokers of India, "Their balance sheet is much healthier today...Tata may not need to sell any more shares after this issue as cash flows are good enough to generate funds for debt repayment and capital expenditure."

Original plans called for the sale of $325 million shares of A rating, which come with differential voting rights, but Bloomberg points out that due to increased demand Tata ended up listing $550 million of A-shares, along with $200 million worth of common shares.

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