BANGALORE (Reuters) - Tata Motors was unable to cover its 41.5 billion rupees ($850 million) rights issues after its share price fell well below the offer prices, and founders and underwriters would pick up the balance, Indian media reported on Tuesday.
The two simultaneous but unlinked rights offerings, which were pared down from a planned three issues worth 72 billion rupees, closed on Monday. Tata Motors shares closed at 243.90 rupees on Monday, well below the rights issue prices of 340 and 305 rupees.
Hindalco Industries, India's top aluminium maker, said last week it received subscriptions for 55.97 percent of a 50.5 billion rupee rights issue, and underwriters and founder would cover the balance.
Tata Motors, India's top vehicle maker, has said that the proceeds of its two issues would be used to make an early repayment on some of the short-term funding of its $2.3 billion acquisition of Jaguar and Land Rover from Ford Motor.
The company offered one ordinary share at 340 rupees for every six held to raise 21.9 billion rupees. It also offered one 'A' ordinary share, which has different voting and dividend rights, at 305 rupees, for every six shares held.
The Economic Times said the offer of ordinary shares was barely half covered, with major shareholders including Life Insurance Corporation and New India Assurance and Germany's Daimler opting not to take up the issue.
"We did not invest in Tata Motors rights offer as shares are available in the markets 28 percent cheaper than the offer price," an official of an Indian financial institution, who didn't want to be named, told the newspaper.
"It does not make any economic rationale for us to invest in the offer even though the company has long-term prospects."
The Tata group was likely to cover the unsubscribed portion of the ordinary share issue, the newspaper said, while the differential voting rights portion would be covered by the founders and underwriter JM Financial.
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