FIIs like DSP Blackrock, Prudential step in with buys.
Tata Sons, the holding company of the Tata group, and Tata Steel have together sold 7.8 million shares in Tata Motors with differential voting rights (DVRs) in the past two days, raising Rs 348.63 crore.
After the promoter offloaded the stake, foreign institutional investors such as DSP Blackrock Trustee Company and Prudential Asset Management picked up the DVR shares, leading to increased transactions in recent days.
DSP Blackrock bought 5.11 lakh DVR shares, while Prudential picked up more than a million. Other mutual funds, like Sundaram BNP Focus Fund, Tax Saver Open Ended and Pru India Equity Open collectively bought more than 2.29 million shares.
This is not the first time that Tata Sons sold Tata Motors’ DVR shares in the open market. In September, the holding company, which also has the highest DVR shares, off-loaded 1.75 million shares and raised Rs 77.26 crore.
As a result of the latest stake sale by Tata Sons (3.93 million shares), Tata Motors’ DVR holding fell by 6.13 per cent to 62.24 per cent from 68.38 per cent at the end of September. Tata Steel’s DVR holding fell to 2.61 per cent from 8.63 per cent earlier with the sale of 3.86 million shares.
Increased activity was reported in the Tata Motors DVR stock during the past three months, which came as a surprise to the market, as it had reported one of the lowest trading volumes on the Bombay Stock Exchange (BSE) soon after it launched in November. In February and March, just 42 shares were traded on the BSE.
Based on today’s closing price on the BSE, the Tata Motors DVR stock has risen 48.46 per cent in the past three months to Rs 467.75 against Rs 315.05 (on August 13, 2009). The stock hit a 52-week high of Rs 480.55 on November 12, according to the BSE data.
The upward movement of the DVR stock price, despite the promoter companies selling their stake, is a result of improving domestic demand for commercial vehicles, as well as the positive sales of passenger vehicles.
According to the sales data provided by Tata Motors, the company’s cumulative sales (April-October) of commercial vehicles grew 17 per cent to 192,241 units. Passenger vehicle sales grew 3 per cent to 118,579 units cumulatively.
Tata Motors had issued 64.17 million DVR shares as a part of its plan to raise Rs 4,145 crore through a rights issue for repaying the loan taken for Jaguar and Land Rover’s buy. The DVR shares were listed on the stock exchanges in November last year.
DVR shares get 5 per cent more dividend than normal shares but carry only one-tenth of the voting rights. Hence, the shares are supposed to trade at a discount to ordinary shares simply because they have much lower voting rights.
Of the total issue, about 54.08 million DVR shares, or 84.27 per cent, were held by promoters. This holding has now come down to about 67.06 per cent. The DVR shares are currently trading at a discount of 32.54 per cent compared with the ordinary shares of Tata Motors which closed Friday’s trade at Rs 619.50 on the BSE.
(With inputs from Deepak Korgaonkar)
