The country's third largest carmaker Tata Motors is likely to launch a $525 million share sale to institutional investors to finance its investment initiatives and cut down on its debt. Industry sources said that the money would be used for product development. http://www.financialexpress.com/news/Tata-Motors-mulls--525-m-share-sale-to-institutions/691307/ Tata Motors plans to raise $525 million through a qualified institutional placement of ordinary and differential voting rights shares as part of its Rs 4,700-crore fund-raising plan, aimed mainly at reducing debt, sources close to the development said.
http://www.business-standard.com/india/news/tata-motors-to-raise-525-mn-via-qip
QIP means Qualified institutional placement which can be termed as a capital raising tool by a listed company who can issue equity shares, securities other than warrants, partly and fully convertible debentures which can be converted into equity shares to a Qualified Institutional Buyer (QIB). This can be seen as a method that companies use to raise money quickly other than preferential allotment. This method does not involve many procedures to work out to bring it to life with the market regulator.
QIP was introduced in 2006 by SEBI which would enable the listed companies to raise money from the domestic markets within a short time frame. Another advantage with this method was to prevent the Indian companies from having over dependence on the foreign capital. Before the introduction of the QIP there were many complications that were associated in raising the funds from the domestic markets.
The issue of securities would be allowed only to the QIB's. The QIB's shall not have any relation with the promoters of the issue nor can he be a promoter. The issue is managed by SEBI registered banker. This issue does not need to have a pre-issuing filing with the SEBI. The documents can be found at the Websites of the issuer and also with the stock exchanges. It would be accompanied by an disclaimer that the issue is not for public and its only for QIB's. Many companies that were hit by the financial melt down, had raised money with the markets showing signs of revival. There is an expectation of a large number of issue on the way in the near future.
What Does Ordinary Shares Mean?
Any shares that are not preferred shares and do not have any predetermined dividend amounts. An ordinary share represents equity ownership in a company and entitles the owner to a vote in matters put before shareholders in proportion to their percentage ownership in the company.
Ordinary shareholders are entitled to receive dividends if any are available after dividends on preferred shares are paid. They are also entitled to their share of the residual economic value of the company should the business unwind; however, they are last in line after bondholders and preferred shareholders for receiving business proceeds. As such, ordinary shareholders are considered unsecured creditors.
