Tata Motors in talks to sell stakes in units to raise funds: report
NEW DELHI (AFP) — India's top vehicle maker Tata Motors is in talks with private equity funds to sell stakes in six units, according to a report, as the company seeks to finance its Jaguar-Land Rover purchase.
The Indian firm, which bought the British luxury icons early this year for 2.3 billion dollars, decided to sell off assets last month after cancelling a convertible preference share issue when its share price tumbled.
Tata is in talks to sell stakes in Tata Daewoo Commercial Vehicle Co., HV Excels, HV Transmissions, Tata Motors Finance, Tata Technologies and Telco Construction Equipment, the Economic Times said, quoting unidentified bankers.
"The company feels it need not hold large holdings in these subsidiaries... and will bring them down by 20-25 percent in each," a banker close to the developments was quoted as saying.
"But it would like to hold a majority stake in these firms, which are mainly supplying components to it or financing its products," the banker added.
Tata Motors declined comment. But it said last month it would raise funds through a "phased divestment of certain investments over the next six to eight months," preferably to companies within the sprawling steel-to-tea Tata Group.
The move is part of the company's plan to raise 30 billion rupees (650 million dollars) through the sale of stakes in unlisted units and selling shares in listed firms, the newspaper said.
Tata Motors would conclude the stake sales by June 2009.
Tata Motors' 42-billion-rupee rights issue to help finance the deal is slated to open Monday.
The company took a one-year three-billion-dollar bridge loan last June of which 2.3 billion was spent on the Jaguar-Land Rover acquisition and the rest to meet Jaguar-Land Rover's working capital costs.
Since then, its bankers have been working overtime to reduce the size of the loan as the Indian group faces a tough climate with slowing domestic vehicle sales and tight global credit markets.
Tata Motors has already begun selling shares in Tata Steel as part of its fund-raising drive.
On Thursday, it sold 1.3 percent of Tata Steel for 4.85 billion rupees to Tata Sons, the group holding firm, according to the Mumbai stock exchange.
The company is expected to post a 15 to 20 percent fall in net profit for the year, the paper said.
The Jaguar-Land Rover purchase has come at a bad time, with sales of luxury cars falling in many markets in the wake of subprime crisis.
The company is also under pressure with labour woes forcing it to transfer production of its eagerly awaited Nano, whose price tag of 100,000 rupees ranks it as the world's cheapest car.
