MUMBAI: Private utility Tata Power on Wednesday raised $335 million — about Rs

1,711 crore, as per current exchange rates — through a global
depository receipt
(GDR) issue, becoming the second company from the Tata Group to raise funds for its capex through the international share sale route.

Like Tata Steel, Tata Power, too, increased the size of the GDR issue based on investor interest. It had earlier announced to raise $250 million, but increased the amount due to robust demand from investors. “The (GDR) offering attracted quality investors which enabled the company to raise the offer size to $335 million,” said Tata Power executive director (finance) S Ramakrishnan. “This deployment strategy would create value for the company’s shareholders in the future,” he said.

Tata Power issued 14.8-million GDRs priced at $22.58 apiece. Each GDR represents one equity share and is scheduled to be listed on the Luxembourg Stock Exchange by the end of this month, Tata Power said in a statement.

The GDR option is fast-becoming a popular option for large Indian companies keen to tap a relatively free global market, which is recovering from recession.

Also, for companies stretched with debt, it gives a better option to improve the debt-equity ratio. Last week, Sterlite Industries raised $1.5 billion (about Rs 7,200 crore) through an American Depository Receipt (ADR) sale. On Tuesday, Tata Steel and Suzlon raised more than $600 million through GDR sales.

Tata Power plans to fund its capex programme from GDR proceeds. The Mumbai-based utility, which is the largest private sector company by capacity, has planned to scale up power generation capacity to about 9,000 megawatts (MW) by 2012. It currently has a capacity of 2,700 MW. Tata Power also plans to expand its transmission and distribution network and had been planning to raise around Rs 2,500 crore within three years, to manage the equity funding for its proposed projects. The new projects include the 4,000-MW ultra mega power project at Mundra in Gujarat, and transmission and distribution projects.

Analysts tracking large companies said global investors would typically favour and invest in the GDR issue of big Indian companies that have a strong international presence. While Tata Power is not directly present internationally, the company has been scouting for raw material assets overseas, to reduce its cost of production. Like in most capital market issues, the pricing of the GDR is also considered vital, as it gives an indication of the confidence level that a global investor has on the growth prospects of the Indian company.

As per the Sebi pricing formula, the floor price for the issue as on date is Rs 1,090 (with the dollar reference rate taken at 48.27 to the rupee) and in-principal approvals have been obtained from the BSE and the NSE. Goldman Sachs International and JP Morgan Securities are the joint global co-ordinators, book runners and lead managers to this issue, while SBI Caps (UK) was the co-lead manager.