Tata Motors pledges entire stake in Tata Steel

Tata Motors, one of the promoter group companies of Tata Steel, has pledged its entire holding of over 10.4 million shares in the steel major, Tata Steel said in a filing with the Bombay Stock Exchange.

Tata Steel said Tata Motors pledged 1,04,40,882 shares, representing 1.31 per cent stake in the company, on 27 August.

At close of trading on the BSE, on 27 August, Tata Steel was trading at Rs438.60 and, at this price, Tata Motors would have received Rs455 crore by pledging its Tata Steel stake.

Tata Motors needs to raise an estimated $1 billion via fresh equity issue and asset sales to deleverage its balance sheet and trim its debt-to-equity ratio to reasonable levels.

The company's debt-to-equity ratio rose to 10:1 on an adjusted basis at the end of the 2008-09 fiscal, against the industry average of 0.47.

The rising debt has been due largely to last year's purchase of Jaguar-Land Rover, for which Tata Motors took a bridge loan of $3.2 billion, and made additional working capital investments in the loss-making unit.