INDIA BUSINESS WORLD SEPTEMBER (16^th - 30^th) 2007
The Month that was ...

TATA SONS BUY 14.7% OF ENGINEERING COMPANY PRAJ INDUSTRY

TATA Sons, the unlisted holding company of the Tata group, has bought 14.7% in engineering company Praj Industries in an open market transaction totalling Rs 338 crore. This signals the Tatas' intention to enter the distillery and wastewater treatment industry.

The move also indicates a major change in the shareholding pattern of the Pune-based Praj as the market transaction falls a notch below the takeover code. According to the Bombay Stock Exchange, Tata Sons bought 9.13 crore shares at Rs 252 per share, which is at a 6% premium to closing price of Rs 238 per share. Praj's shares were down 4.1% on the BSE.

The move by Tata Sons assumes significance as the group's current shareholding is now just below the Sebi-stipulated trigger for an open offer. According to capital market norms, if a company acquires 15% of the stock in another company, then the acquirer has to make an open offer to retail shareholders to buy at least 20% of the target company.

Despite repeated attempts, there was no official comment from either Tata Sons or from Praj Industries.

However, sources in the Tata group said that the move is mainly to cash in on the growing demand for ethanol and brewery technology.

The promoters-the Chaudhari family-hold 28.2% in the company where other prominent shareholders include large investors such as Vinod Khosla (8.8%) and Rakesh Jhunjhunwala (6%).

"Ethanol is here to stay," said an analyst tracking the sector. "The business has better margins and the demand is likely to rise further as governments across the world are making it mandatory for companies to hike ethanol content in fuels," he added. Ethanol in fuel reduces harmful emissions.

Although the shares of Praj were down, the stock has outperformed the stock market in the past one month when it surged by 30.3%, compared to the 14% rise in the broader index.