Life Insurance Corporation of India and DaimlerChrysler, one of the oldest partners of Tata Motors [Get Quote], may refrain from participating in the ongoing Rs 4,145-crore (Rs 41.45 billion) rights issue that is closing on October 20, investment banking sources said. The move comes after Life Insurance Corporation of India expressed its wariness in putting in its bid.

LIC [Get Quote] and Daimler are entitled to subscribe to Rs 750 crore (Rs 7.50 billion) worth of shares. LIC can exercise its option to invest around Rs 475 crore (Rs 4.75 billion), which includes Rs 250 crore (Rs 2.50 billion) toward ordinary equity shares and Rs 225 crore (Rs 2.25 billion) for 'A' category ordinary shares, which carry variable voting rights. DaimlerChrysler owns 6.64 per cent stake in the company.

Tata Motors shares are trading 28 per cent below, or at Rs 243.40 at the close of trading on Friday, compared with the rights offer price of Rs 340 for common shares. "The issue, which is closing on October 20, has received poor response till now from the shareholders and other investors," the sources said.

The promoters' stake in Tata Motors may rise to 42 per cent from 33.4 per cent if the founders are forced to buy all of the issue.

The company in a statement said that the promoters would subscribe to any under-subscription left after procuring from investors and underwriters under the underwriting agreement.

For the simultaneous, unlinked issue of variable voting shares, JM Financial [Get Quote] has underwritten Rs 1,327 crore (Rs 13.27 billion). The investment bank will earn around Rs 30 crore (Rs 300 million) as underwriting commission. 

Investment banking sources said that JM Financial has already entered into an arrangement with a large fund for Rs 1,000 crore (Rs 10 billion).

However, a senior official of JM Financial declined to comment.