Tata Motors partially divests Tata Steel stake to raise Rs485 crore for JLR

Mumbai: Tata Motors has sold over 10 million shares or 1.3 per cent equity of Tata Steel Ltd to group holding company Tata Sons Ltd for a total of Rs485 crore to repay part of the short-term loans it raised to fund the $2.3 billion acquisition of Jaguar and Land Rover brands from Ford Motors.

The shares were sold in two tranches of 5 million shares at Rs485.70 and Rs485.40, respectively, on the Bombay Stock Exchange, according to the bulk deals data provided by the exchange.

The sale will boost Tata Sons' stake in Tata Steel from the present 27.9 per cent to 29 per cent while Tata Motors will reduce its holding in Tata Steel from 3 per cent to 1.7 per cent.

The stake sales values Tata Motor's total stake in Tata Steel at more than Rs1,000 crore.

The company also sold 15 per cent stake each in its unlisted subsidiaries, HV Axles and HV Transmission, to raise money for the acquisition. It had earned a profit of more than Rs 138 crore through sales of shares. As of March 31, 2008, Tata Motors had 27 subsidiary companies.

Tata Motors is also reported to have initiated talks with private equity funds to sell up to 25 per cent stake each in four of its other unlisted subsidiaries - Tata Daewoo Commercial Vehicle Company, Tata Motors Finance, Tata Technologies and Telco Construction Equipment (Telcon).

Apart from the stake sale in group companies, Tata Motors also plans to raise debt overseas and sell rights shares to raise money for the JLR acquisition.

Tata Motors is raising Rs 4,200 crore from a rights offer, which will open for subscription on Monday. The company had earlier planned to raise Rs7,200 crore through rights shares, but revised the issue size after market conditions turned volatile.

Rating agency Crisil, meanwhile, downgraded Tata Motors Finance's (TMFL's) three securitised transactions from AAA (So) to AA (So) due to lower than expected collections and higher delinquency. These transactions are backed by vehicle loan receivables. The combined retail finance portfolio of Tata Motors (TML) and TMFL has witnessed continued weakness. The 180+ portfolio delinquency increased to 8.7 per cent in August 2008 from 6.2 per cent in September 2007.