Daimler AG sells its shares in TATA Motors

German auto major Daimler, which holds a 5.34% stake in Indian automobile giant Tata Motors, is soon expected to sell its entire stake, consisting of nearly 2.56 crore shares. At the current market price, Daimler's stake is valued at about Rs 2,050 crore (nearly $450 million).

However, institutional broking sources said Daimler is planning to sell the shares at some discount to the current market price. On Monday, Tata Motors shares on the BSE ended at Rs 797, marginally up 0.2% over Friday's closing price.

Market sources pegged the price discount between 4-7%, i.e. in a range of Rs 737 and Rs 761 per share. At the upper end of the price band, the total deal could be worth nearly Rs 1,950 crore (about $427 million). Citigroup was handling the issue. A Daimler official declined to comment on the reported share sale and a Tata Motors spokeswoman did not offer any comment.


Like in several such recent deals, this would also take the block deal route on the bourses, institutional dealers said. This is because deals done through the bourses qualify for capital gains tax while off-market deals lead to substantial tax outgo for the seller. Over the last few months, among the notable block deals, huge chunks of Reliance Industries stocks, from its treasury, were sold through the block deal route. A substantial chunk of DLF's promoters' holdings were also offloaded through block deals. In both instances, all buyers were institutional investors.

As of December 2009, Daimler held 5.34% of Tata Motors' ordinary shares, making it the third-largest shareholder in the company. The promoters now hold nearly 25% while Life Insurance Corporation has 11.2% in the company.

Over the last six trading sessions, i.e. since the Budget proposals were announced, the Tata Motors stock has risen 19%. While budget proposals relating to the automobile sector were according to investor expectations, the same day the company had also announced its consolidated financial numbers which showed substantial improvements in its Jaguar and Land Rover unit.