Tata Motors has slowly inched up its holding in Automobile Corporation of Goa (ACG) — a little known Goa-based firm, which is one of the major suppliers to the Tata company. It has scaled up its shareholding by nearly 3% in ACG to 40.6% in about three months through open market operations. This has led to market speculation that the Tatas may eventually take majority control of ACG.

Tata Motors has been ramping up its shareholding in the past one year or so. Its holding went up to 37.7% in March 2008 from 31.5% in March 2007. A major portion of this increase came after ACG’s rights issue in 2007. In addition to its own entitlement, Tata Motors had subscribed to the unsubscribed portion of other shareholders, including co-promoter Economic Development Corporation of Goa, to bail out the rights issue.

The issue was priced at Rs 475 per share against the market price of Rs 431.1on the day of opening of the issue (March 20, 2007). After nearly a year, Tatas struck again in June with acquisition of 2.8% equity from the open market, taking its holding to 40.6%. Analysts say the prospects of the bus market are promising as the segment is currently growing at the rate of 8-10% after posting negative growth in the past. Tatas’ strong belief in ACG’s potential is also reflected in their move to pick up the unsubscribed portion in the company’s aggressively priced rights issue.

Over the last few months Tata Motors has been trying to enhance its presence in the bus market as it sees a huge potential there. While other categories of commercial vehicles are experiencing a decline, the bus segment continues to record a healthy growth. The demand for modern buses is expected to rise given the number of highways and golden quadrilaterals coming up and the buses being used as potential ‘people movers’.

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