Citing two sources familiar with the development, a local business daily says Tata Motors intends to sell a 10-15% equity stake in its financial arm, Tata Motors Finance. This move is reportedly aimed at raising funds in order to reduce its debt.
The company's debt currently stands at Rs240bn (US$4.96bn). This potential stake sale could yield Rs2bn, which would value the subsidiary at Rs13-20bn, The Economic Times says.
It is believed that Tata Capital could be a potential buyer for this stake. Sources have said that other companies operating in the same industry could be the targets for this sale.
“Tata Motors is committed to deleverage the company through divestments and capital raising at an appropriate time, but specifics will be announced as and when we finalise [deals] on a case-to-case basis,” the newspaper quotes a company spokesperson as saying.
Earlier this week, unconfirmed reports claimed that Tata Motors plans to raise US$400m through global deposit shares to reduce debt. In 2008, the OEM sold a 15% stake in HV Axles and another 15% stake in HV Transmissions, valued at Rs650m and Rs740m, respectively, to Tata Capital.
Source: Automotive World