Daimler AG has raised Rs 1,924 crore (€300 million) by selling its entire 5.34

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per cent stake in Tata Motors on Tuesday. Tata Sons, the parent company of Tata Motors, bought four million of the 25.6 million shares on offer at Rs 750 apiece in the open market. The remaining shares were lapped up by a clutch of foreign institutional investors (FIIs).

Daimler, the world’s largest truck manufacturer, had appointed Citigroup to sell the shares. On Tuesday, the sale was concluded at an average price of Rs 751.67 a share, marking the exit of the German truck maker company from the Indian company with which it had been associated for 56 years.

Among FIIs, Citigroup Global Markets Mauritius acquired 4.65 million shares at Rs 752.41 a piece from the stock market. The deal value is over Rs 350 crore.

“The Tata Motors stock has risen significantly over the past year. So Daimler will receive a cash inflow of about €300 million from the sale,” Daimler said in a statement on Tuesday.

The Stuttgart-based company said the sale was done after consultations with the Tatas. “Relations between the two companies are excellent and will not be adversely affected by this sale,” it said.

The Tata Motors stock fell by 3.24 per cent on the Bombay Stock Exchange (BSE) to close at Rs 770.90.

The sale will have a positive effect of about €265 million on Daimler’s earnings before interest and taxes, and will be accounted for in the first quarter of 2010, according to the company statement.

“Daimler is today in an excellent position to capitalise on the growth potential of the Indian passenger and commercial vehicle market and continues to intensify its own activities there,” said the German carmaker. “An equity participation of Daimler in Tata Motors is, therefore, no longer necessary,” it said.

Before the sale, promoters held 38.08 per cent in Tata Motors. Of this, Tata Sons had 27.13 per cent, and the balance was with other group companies. FIIs held 15.67 per cent. The stake of Tata Sons and FIIs is expected to go up as a result of the sale.

According to BSE data, the value of the four million shares that Tatas Sons bought in the sale would be over Rs 300 crore.

Vaishali Jajoo, automobile analyst at Angel Broking, told Financial Chronicle that the purchase by Tata Sons indicated its confidence in Tata Motors. “We expect both the truck and passenger car businesses to record good growth this financial year. The truck business, which is more or less a cyclical one, is expected to grow at around 15 per cent in 2010-11,” said Jajoo.

According to a banker, Citigroup Global Markets Mauritius, a custodian, bought 4.65 million shares on behalf of some FIIs. “The deal was closed on Tuesday. Tata Sons bought some stake. The rest was bought by other FIIs in the price band of Rs 750-752 a share,” the banker said.

Daimler had floated a joint venture, called Daimler India Commercial Vehicles, in partnership with the Hero group to make trucks in India. But the Indian partner pulled out, as it wanted to be focused on motorcycles. Thereafter, in 2009, Daimler took full control of the company, in whose factory in Chennai it will invest €700 million.

Daimler already sells its Actros range of trucks in India. The trucks are assembled at its wholly-owned subsidiary, Mercedes-Benz’s plant in Pune.

The Chennai factory will begin production in 2012 by rolling out light, medium and heavy-duty trucks under a new brand name for the Indian market. Export production will start later.

(With inputs from Sneha Shah)