Tata Motors has ambitious plans to strengthen its market share. For the purpose, the company came out with a rights issue in May which was a resounding success. The company intends to utilize the capital raised to fund introduction of more than 100 new commercial vehicles over the next three years and passenger vehicles on a new modular platform from 2016-17.
As part of the rights issue, ordinary shares were over-subscribed by 1.17 times, with an amount of Rs. 7,956.73 crores collected on applications and ‘A’ ordinary shares were over-subscribed by 1.51 times, with an amount of Rs. 1,083.83 crores collected.
“We value the positive and encouraging response of our shareholders in supporting this raising of capital, and would like to thank them for their trust and confidence,” said Mr. C. Ramakrishnan, Chief Financial Officer, Tata Motors.
The proceeds from the share issue are intended to be used for funding expenditure towards plant and machinery, research and product development, repayment in full or in part of certain long-term and short-term borrowings, and general corporate purposes, according to company sources.
The home grown automobile major’s rights issue to raise Rs. 7,500 crores began on April 17, 2014, and closed on May 2, 2015. As part of the share sale, the company offered up to 15,06,44,759 ordinary shares of face value Rs. 2 for cash at a price of Rs. 450 (including a premium of Rs. 448 each). This was issued in the ratio of six ordinary shares for every 109 fully paid-up ordinary shares held.
Tata Motors would also utilise the funds to strengthen the capital structure by deleveraging the balance sheet to build financial flexibility, partly correct the accumulated mismatch between the long-term sources and application of funds, and meet issue expenses.
Elaborating on the new product development plans in the commercial vehicle (CV) space, the company said the major actions planned include “over 100 new products/variants for domestic and international markets over the next three years, launch of the Ultra range of trucks and broadening the Prima portfolio for market competitiveness.”
Besides, the company is looking to develop a product portfolio in the passenger vehicles segment until 2020, with the introduction of two or three new products each year.
The other initiatives planned include eight improved and enhanced vehicles across five key brands over the next two or three years and “products offered on a new modular platform from FY 2016-17”.
The company is looking to enhance purchase experience at dealerships and improved service quality. Also planned is expansion of commercial and passenger vehicle operations in Thailand, Indonesia and South Korea as well as penetration of new export markets, including Australia, the Philippines and Vietnam. The dealer network in the country is proposed to be doubled by 2020, targeting rural areas and cities alike, as the company looks to claw back to a dominant position in the Indian passenger car market.
Tata Motors which currently has around 500 touch-points across the country aims to add an equal number of dealerships to expand its presence.
– PTI Economic Service