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Tata Tech talks to PE investors

Tata Technologies, the engineering design and technology arm of the Tata group, is looking to do a private placement and is in talks with some PE investors, said a source familiar with the Pune-based company's plans. The renewed fund raising exercise comes after the company cancelled its initial public offering proposal some months ago. The plan was to raise Rs 400-500 crore from the capital market.

Details about its proposed private placement remain sketchy. Sources say the company, depending upon valuations, intends to dilute 10-12% equity stake. Tata Motors is the single largest shareholder of Tata Technologies, with holding of 82%. The design houses employees and other Tata entities hold the balance. The company serves automotive, aerospace and consumer durable manufacturers.

The global economic slump has dragged valuations southwards sharply, with the impact being felt even on PE deals. The number of PE transactions being closed has dropped noticeably in the past several months.

The Rs 1,100-crore Tata Technologies group, with over 3,000 employees, has development centres in the US and Germany. The private placement could be through a combination of Tata Motors selling its stake and Tata Technologies issuing fresh equity to the new investor.

For the cash-starved Tata Motors, this is part of its strategy to monetise part of its investments in subsidiary companies. And for Tata Technologies, the proceeds would help reduce debt.

In October 2005, Tata Technologies acquired UK-based INCAT, which in turn acquired Stuttgart, Germany-based CEDIS Mechanical Engineering in 2006.

If the deal materialises, this would be one of the few closely-held Tata companies which would tap PE money. Some of the earlier PE deals include Singapore government investment arm Temasek buying into mobile operator Tata Teleservices and direct-to-home service provider Tata Sky. International Finance Corporation and IL&FS have invested in Tata Teas Amalgamated Plantations, that runs its North India plantation operations.

Source: Times of India

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