Tata group’s stake in auto co set to cross 50%-mark
MUMBAI: The Tata group’s shareholding is set to cross the half-way mark in Tata Motors. This is due to the huge under-subscription to the Tata Motors’ rights issue, which has resulted in the Tatas picking up the unsubscribed portion in addition to their entitlement. Consequently, the group’s stake is expected to increase by nearly 16% to a little over 50%, the highest holding among the major Tata group entities.
Data compiled by the merchant bankers and registrar of the issue indicate that 6-7% of the non-promoter shareholders have opted for the ordinary equity shares of the issue. The figure is even lower, around 2%, for the component with differential voting rights (DVR).
It is learnt that the non-promoter shareholders have chipped in Rs 160-170 crore of the issue, leaving nearly Rs 4,000 crore for the Tatas to infuse in order for the issue to succeed. Tata Motors spokesperson said: “The company will file the necessary information, in accordance with rules, at the appropriate time. We are not in a position to comment at this stage.” The issue closed on October 20, 2008.
Tata Motors launched a simultaneous but unlinked rights issue to raise Rs 4,146 crore to part finance its acquisition of Jaguar and Land Rover which it bought from Ford early this year for $2.3 billion. The ordinary share portion was to collect Rs 2,185.3 crore while the DVR component was to raise Rs 1,960.4 crore.
The promoters are subscribing heavily to the under-subscribed part of both the components. But, due to the DVR shares, which attach lower voting rights than the ordinary shares, the Tata group’s voting rights will be less than its equity shareholding, sources said.
The issue has failed to garner response from the non-promoter shareholders due to the global financial crisis which has taken its toll on the stock. On the date of closing, Monday, the Tata Motors stock was traded at around Rs 243.
The ordinary share portion of the issue was priced at Rs 340 a share while the DVR component was priced at Rs 305 apiece. The promoters have committed to subscribe to the entire unsubscribed portion of the ordinary share part of the rights issue.
The DVR issue was 67% underwritten by JM Financial which later struck a deal with the Tatas wherein the Tatas would acquire the additional under-subscribed portion of the DVR issue, in addition to their entire entitlement of 33% of the offer, if JM Financial fails to pick it up.
The Tata Motors stock slipped nearly 15% to close at Rs 195 on BSE. The rise in the Tata shareholding to a stake in excess of 50% marks a sharp departure from the times when big business houses used to run companies with around 20% holding with the support of the financial institutions.
Sometimes, friendly investors had more equity stake than promoters. For instance, at one point in time, the shareholding of legendary Ghanshyam Das Birla was more than the Tata group’s holding in Tata Iron & Steel Company, later renamed Tata Steel.
The old business houses have been scaling up their holdings over the past few years to keep hostile raiders away. The list includes, Tata Steel and Aditya Birla group flagship Hindalco. However, the promoters are yet to reach absolute majority stake in most of these companies.
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