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No takers for Tata Motors issue
Published on 22 Oct. 2008 12:44 AM IST
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Tata Motors' Rs 4,145-crore rights issue that closed on Monday has devolved on promoters and the lead manager to the issue, JM Financial, with most of the institutional and retail shareholders staying away from the offer, according to Times News Network. Ever since the rights offer opened on September 29, the continued downtrend in the stock market has impacted the issue. On Monday, Tata Motors share closed at Rs 244 on BSE, while its rights issues - of ordinary and Class A shares - were priced at Rs 340 and Rs 305 respectively. Class A shares are securities that carry lower voting rights with higher dividend. It is learnt that Tatas would have to subscribe to over 55% of the total issue. Tata Motors officials didn't comment as the final data on the offer was being collated and will be available in a couple of days. This is the second issue from the Tata group stable that devolved on the promoters. Tata Investment Corporation's issue too took a toll in a bearish market. Tata Motors issue is the second high-profile rights offer in the recent times that devolved on the promoters. The rights issue for Hindalco, the Aditya Birla group flagship company, also devolved on the promoters and the underwriters. Currently, Tatas hold 33% stake in Tata Motors, the group's flagship company. Following the subscription to the unsubscribed shares, the promoters could see their stake rise to over 40%. LIC, which holds 11.45%, told TOI that it did not participate in the rights issue. Daimler, Tata Motors' second largest non-promoting shareholder with a 6.64% stake in the company, has also renounced its rights, Tata group sources said. With this, the German carmakers' interest in the Indian auto giant will come down further. At one point of time, Daimler held over 10% and also had a position on the company's board. As per the underwriting agreement, Tatas will subscribe to the entire portion of the ordinary issue and a part of the Rs 1,960-crore differential voting rights (DVR) issue. About 67% of the DVR issue will be underwritten by Nimesh Kampani-owned JM Financial. The other large shareholders of Tata Motors include New India Assurance (1.2%), FID Mauritius (3.4%) and EuroPacific Growth Fund (3%). Divestment must in arms Tata Motors has to divest its interest in two of its subsidiaries - Tata Motors Insurance Broking & Advisory Services and Sheba Properties - as per the recommendations by Foreign Investment Promotion Board (FIPB). While FIPB clarified that Tata Motors rights issue to its overseas shareholders falls under the automatic route, it has advised that the subsidiary undertaking investment activity to be hived off and the foreign investment in the insurance broking outfit be maintained at 26%, as per the rules in the insurance sector. Sheba Properties is a wholly owned subsidiary of Tata Motors and was in the news in early 2000s for some of the transactions with Tata Finance.

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