Tatas eye Actis stake in Swaraj Mazda

MUMBAI: Tata Motors, the country's largest commercial vehicle maker, is exploring the possibility of buying the equity stake of private equity
major Actis in commercial vehicle and bus maker Swaraj Mazda (SML). ( Watch )

The Tatas move to look at Actis' stake - it owns 7.7% and another 9.3% through unit CDC - was triggered after the private equity major started considering exit options from its investment in Swaraj Mazda, which was made in 2004, for about Rs 370 crore, according to persons familiar with the matter. They spoke on condition that neither they nor their organisation be identified.

The Actis stake is also learnt to have attracted other auto majors and a Kolkata-based engineering firm, besides other private equity funds that are looking to enter the fast-growing Indian auto market, estimated to grow at 8-10% this fiscal year.

The potential buyers are currently looking at the 7.7% stake held directly by Actis. If the CDC stake is also sold then the buyer would have to make an open offer under India’s rules governing the takeover of companies. The eventual role of Tata Motors in Swaraj Mazda, if any, will depend on the intentions of Japanese conglomerate Sumitomo, which has a controlling 53.5% stake in the Punjab-based company.

A senior Tata Motors executive said the company was looking at various options to increase its share in the Rs 10,400-crore Indian LCV market, though he declined to comment on whether the company was interested in Swaraj Mazda.

A Tata Motors spokesperson said: “This is purely speculative, on which we don’t have any comments.” Actis India head JM Trivedi also refused to comment on the issue.

If Tata Motors does indeed pick up a stake, it will give the commercial vehicle maker access to the lucrative north Indian LCV market, a segment where it has comparatively weak presence, against its market shares in the western and southern Indian LCV market.

The deal, if it fructifies, will mean that along with an access to Isuzu technology, Tata Motors would also get to increase its presence in bus body-making, another major growth area. It may be mentioned that Tata Motors recently acquired the entire equity capital of Spain’s Hispano Carrocera, a global leader in bus and coach making.

Other large shareholders in Swaraj Mazda include Reliance Capital with an 8.5% stake. Tractor major Mahindra & Mahindra earlier held a minor stake in Swaraj Mazda through Punjab Tractors, which it exited early this year by selling its 14% stake to Japan’s Sumitomo.

Tata Motors, which sells the popular Ace model in various markets across the country, has a commanding 70% share of the Indian commercial vehicle market and has been looking at further consolidating its presence by extending its fastest-growing products into the northern region.