German carmaker Daimler was selling its entire stake in India's Tata Motors to raise up to $429 million worth of shares, sources familiar with the matter said on Monday.

Daimler was offering 25.6 million shares in India's largest vehicle maker at 737.4 ($16.2) to 761.3 rupees each, a discount of 4 to 7 percent below the stock's Monday close of 796.75 rupees, sources said.

The shares represent a 5.34 percent stake in the firm.

Daimler owns 5.34 percent of Tata Motors' ordinary shares and 4.71 percent on a fully diluted basis. Media reports in India had earlier speculated that the German carmaker would look to exit its long-held stake in Tata Motors.

A Daimler official declined to comment on the reported share sale and a Tata Motors spokeswoman did not have immediate comment.

Citigroup was handling the share sale in Tata Motors, which makes the world's cheapest car, the Nano, and also owns the UK-based Jaguar and Land Rover luxury brands.

Shares in Tata Motors have risen 19 percent since Feb 26 when the company posted a consolidated net profit for the second straight quarter as sales from its Jaguar and Land Rover unit recovered.

Tata Motors shares ended 0.18 percent higher on Monday before the share sale was revealed. Daimler shares were flat on Monday.

Car sales in India have surged in recent months and jumped by a third in February to a record as buyers rushed to beat a planned increase in taxes. The momentum is expected to continue in March before new emissions rules kick in and push up prices.

($1=45.5 rupees)

(Reporting by Tony Munroe, Sumeet Chatterjee and Pratish Narayanan in MUMBAI and Christiaan Hetzner in FRANKFURT; Editing by Surojit Gupta)