MUMBAI: 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, which signals the Tatas’ intention to enter the distillery and waste water treatment industry.
The move by the Tatas 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 BSE, Tata Sons bought 9.13 crore shares at Rs 252 per share, which is at a 6% premium to Wednesday’s closing price of Rs 238 per share. Praj’s shares were down 4.1% on BSE on Wednesday.
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 Praj Industries. However, sources in the Tata group said 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.
Praj earns around 85% of its revenue from distillery plants and equipment and waste water treatment systems.
Although Praj shares were down on Wednesday, 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.
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