December 03, 2008

TATA Motors may dilute stake in TATA Steel

ET reported that TATA Motors may dilute its shareholding in TATA Steel to finance the USD 2.3 billion acquisition of luxury brands Jaguar and Land Rover from Ford Motor Company.

The report cited some analysts as saying that TATA Motors may sell its holding in TATA Steel as it is the most valuable chunk of shares in its kitty. They however added that TATA Motors is unlikely to sell its shares in TATA Steel in the open market as any such move will substantially dilute the TATA Steel and in all likelihood would sell the shares to TATA Sons so that the group’s shareholding remains unchanged.

This follows TATA Motors’ announcement two days ago that it had raised a 15 month bridge loan of USD 3 billion from a syndicate of banks to finance the acquisition. TATA Motors said that it would mobilize funds through equity linked instruments, loan term resources and disinvestment of holdings in some group companies to repay the bridge loan.

The TATA Motors board has recently approved plans to raise nearly INR 4,000 crore by selling securities in the domestic as well as international markets to part finance overall funding requirements to meet some of the strategic plans.