Tata Motors 'rights' not going right

Tata Motors is down in the red today morning. The stock which had hit a new high yesterday at Rs.608.40 is today down over 2% at Rs.592.25, with an intra day low at Rs.589.10.

The stock is down after the company announced that it plans to raise Rs.7500 crore via a rights issue, to raise funds for growth but mainly for reducing debt.

The company said that the Rights issue will be for both classes of shares, Ordinary shares and ‘A’ Ordinary shares. Once it gets the shareholders for the rights, the company said that the size of the issue, pricing and timing of the issue will be decided later.

The market is not enthused with this decision to issue rights as there is worry that this will dilute the equity. The rights issue will bring in additional equity and this impacts promoters holding, EPS and even the value of individual share.