CHENNAI/MUMBAI: In a move to consolidate cross-holdings across group firms, Tata Group’s holding firm Tata Sons is set to acquire Tata Steel’s 2.9 per cent stake in Tata Motors.
The announcement on Saturday, made through a filing with the stock exchanges, confirms reports that the Tata Group is planning widespread consolidation of holdings.
The issue of cross-holdings has already come up several times, even during the tumultuous few months following the sacking of Cyrus Mistry from the group’s top post. In November, a group of foreign institutional investors wrote to Tata Steels’ board raising concerns about its cross-holdings in other Tata firms.
According to the filing, Tata Sons will buy around 83.6 million shares in Tata Motors at or around the prevailing price of the stock on the date of the planned acquisition, it said, citing “restructuring of investment portfolio” as the reason for the planned deal.
As per details available, Tata Sons owned 29.75 per cent of Tata Steel at the end of March, while Tata Motors owned a 0.46 per cent stake in the steel major.
While Tata Steel has had a troubled few years, reports have spoken about a proposed merger between the firm’s European business and German industrial group Thyssenkrupp AG.
The merger is estimated to save Tata Steel around 400-600 million euros annually and shares of the Indian-steel major rose sharply driven by improved investor sentiment in late May, hitting a two and a half year high of Rs 514.80.
Share prices have since fallen, with Tata Steel shares closing at Rs 455.75 in Mumbai trading on Friday.
According to analysts, a reduction in cross holdings inside Tata Group are set to unlock a significant amount of value for the group.
Kotak Institutional Equities in a report in March pointed out that Tata Power, Tata Chemicals, Tata Global and Tata Motors would alll benefit from lower debt and interest expenses.
“Any restructuring of the Tata Group through simplification of the holding of various group companies will be received well by the market..,“ said Kotak.