Daimler selling 5.34% TaMo stake

German carmaker DaimlerChrysler AG is selling its 5.34% stake in Tata Motors through an open-market sale.

The shares, numbering about 2.55 crore, are being offered in a price-band of Rs 737.40-761.30 apiece, a discount of 4-7% on the stock’s Monday close of Rs 796.75, said a source familiar with the development.

At that price, Daimler could raise $428 million or Rs 1950 crore. Citigroup is the investment banker handling the sale.

An official from Citigroup, who did not wish to be named, confirmed the sale: “The shares will be sold in the open market, the book is open now.”

“The stake hasn’t taken Daimler anywhere in the last 40 years or so, and having cash these days is a luxury,” Arndt Ellinghorst, an analyst with Credit Suisse in London,  said.

Daimler, busy with other joint ventures, may be looking to “streamline” its portfolio, he told Bloomberg.

C Ramakrishnan, CFO, Tata Motors, said neither Tata Motors nor the Tata Group is looking to buy.

In the late 1960s, Daimler held a 15% stake in what was then called Tata Engineering and Locomotive Company or Telco, where there was an arrangement that if and when Daimler decides to sell its stake in the company, Tata Sons, as the promoter, will have first right to refusal.

This arrangement holds true even today.

But the 15% shrunk to 5% stake over a period of time as Tata Motors’ equity base expanded.

In 1954 Tata and Daimler collaborated to manufacture commercial vehicles.

“The reason Daimler is selling in the open market is because Tata Sons refused to buy,” said an analyst with a domestic brokerage, who did not wish to be named since he is not authorised to speak to the media.

“This will mean the Tata Motors share will correct, and the company’s plan to raise money through the QIP route at a good price will receive a setback,” the analyst added.

Daimler officials refused to comment. The company has been trying to enter India independently for a long time now and it is looking to set up its own truck factory in Chennai.

A few years ago, the Tatas exited from Mercedes-BenzIndia, which was later called DaimlerChrysler India, as it wanted to use that money for its own small car venture Indica rather than in the Benz-Tata joint venture.

The collaboration was a 51:49 joint venture between Daimler and Tata Motors for manufacturing Benz cars in India, news agency Bloomberg said.