M&M to raise Rs 7,000-mn through Goldman Sachs

Mumbai: Tractor and utility vehicle maker Mahindra and Mahindra said that the company would be raising Rs 700 crore through issue of convertible debentures to Golboot Holdings Ltd, an entity controlled by investment bankers Goldman Sachs.

The board of directors of M&M approved issue of 94 lakh unsecured and fully and compulsorily convertible debentures (FCDs) of the face value of Rs 745 each.

The debenture carrying an interest rate of 9.25 per cent per annum, can be converted into equity shares at any time within 18 months from the date of allotment at the option of the investors. The debentures would be compulsorily converted into equity shares of Rs 10 each on the date falling 18 months from the date of allotment the company said in a notice to stock exchanges.

On conversion, Golboot Holdings will hold 3.68 per cent stake in M&M. The issue price represents a premium of 7.91 per cent to the closing price of Rs 690.35 a share traded on the BSE on Friday.

The company said it would utilise the amount raised through this preferential offer for its auto and tractor businesses.

A news agency quoting Mr Arun Nanda, M&M’s Executive Director, said the company has a capital expenditure plan of Rs 7,000 crore for the next three to four years, which would be raised through a mix of equity, debt and internal accruals.

The company will seek shareholders’ approval through a postal ballot. It has recently announced various investments plans, including the Rs 4,000-crore plant at Chakan near Pune to produce 3 lakh vehicles a year. Last week, the company said it would invest Rs 250 crore in setting up vehicle service centres across the country.

Recently, a top official said that the company is looking at acquiring tractor companies mainly in “focussed markets like China, Iran and Turkey”.

“Given the kind of investments they are talking about, Mahindras need much more money than they can raise internally. So, the move to issue FCD is quite natural,” said Mr Ashutosh Goel, an auto analyst with Edelweiss Securities.

Last month M&M announced that the company along with ICICI Venture agree to acquire Italian gear manufacturer-Metalscastello. In January, the company had acquired an Italian design house.