Tata hikes stake in its steel,other cos

Similarly,Tata Sons bought 10.44 lakh shares in Tata Steel in August 2011 from the market and another 5.1 lakh shares from Tata Chemicals on September 5. This has resulted in the promoter company’s shareholding in Tata Steel going up to 28.67 per cent from 28.5 per cent. In both Tata Steel and Tata Motors,while Tata Sons purchased shares from Tata Chemicals,it also bought a significant number of shares from the market. Tata Sons also witnessed a rise in its holding in Trent after the conversion of 12.28 lakh CCPS (compulsorily convertible preference shares) of Trent on September 15 taking its stake in the company to 25.66 per cent from 25.23 per cent. Tata Investment too received 2.12 lakh shares upon conversion of CCPS in Trent on September 15,taking its holding in the company to 4.51 per cent.

When contacted,a Tata Sons spokesperson responded in an e-mail stating,“Tata Sons buys shares of Tata companies when considered appropriate. Disclosures required under relevant regulations are made as necessary.”

Market experts said the move can be a part of the group’s overall corporate strategy to consolidate its holdings. “Purchase of shares from the market shows that the promoter sees value in the long term. Historically,promoter holding in Tata Motors and Tata Steel has been lower so it may be a part of their corporate strategy to raise their stakes in the companies,” said Pankaj Pandey,head of research at ICICIdirect. Some others said the decision to hike stake in group firms may be attributed to the attractive valuation given the drop in market value of shares.

Tata Sons bought the shares from the market at a time when the shares of Tata Motors and Tata Steel had fallen significantly below their 52 week highs. Tata Steel share prices were trading at an average of Rs 465 in the three trading days of August (between Aug 16 and Aug 19) when Tata Sons purchased the shares from the market. Thus it bought it at a 35 per cent discount to its 52 week high of 713.8. Similarly the promoter company bought Tata Motors shares in August when the average price during the six days (between Aug 16 and Aug 23) stood at Rs 151 and thus were at a discount of 45 per cent to the 52 week high of Rs 276 registered on December 6,2010.

Analysts also attribute the ramp up in shareholding to the new takeover code. “The new takeover code enables people to increase their holding in a company up to 25 per cent against the earlier limit of 15 per cent (before they are required to make an open offer). It makes sense for promoters to consolidate their holdings in current market conditions when stock prices have seen a correction,” said Vyapak Desai,head of capital markets practice at Nishith Desai Associates.

The promoter company has made no such move in companies like TCS,Titan or Tata Global Beverages among others as the promoter holding in these firms is far higher. The promoter holding in TCS stands at 74.08 per cent,in Titan Industries it is at 53.3 per cent and in Tata Global Beverages it stands at 35.24 per cent.