The Tata group plans to undertake a massive exercise to clean up the ownership structure of its group companies, with the holding firm Tata Sons buying equity shares held by various group entities one another through a complex web of crossholdings, for as much as Rs 6,000 crore, CNBC TV18 reported on Friday.
The exercise would also result in some prominent listed companies, including Tata Steel, Tata Motors and Tata Chemicals receiving investments to the tune of Rs 6,000 crore, which those companies could use to pare debt to some extent, CNBC TV18 said.
Tata Steel, India’s largest private steel maker, has a sizeable equity stake in 13 listed entities, including Tata Power, Tata Motors, Tata Consultancy Services, Tata Sponge Iron and Titan.
According to the proposal, Tata Sons will buy all these equity stakeholdings from Tata Steel, effectively infusing that much cash into the steel company.
Similarly, Tata Motors, in turn holds equity stakes in Tata Capital, Tata Chemicals, Tata Steel, Tata Sons, among others, which it would sell to the parent company as part of the plan.
CNBC TV18 said the entire exercise could take about three-four quarters.
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Further, this move would also lead to Tata Sons increasing its shareholding in respective companies, in turn acquiring greater control and voting rights, the news channel said.
Earlier last year, Nusli Wadia, the well-known businessman and longest-serving independent director on the board of Tata Motors, had said the automobile major must disinvest its crossholdings in the other Tata group companies, which are in completely unrelated businesses and only serve to Tata Sons to have greater control. Wadia had asked the shareholders to press for selling Tata Motors’ such stakes in other companies, valued at about Rs 8,800 crore, in order to help reduce debt and save Rs 800 crore in interest costs.
Similarly, in November, FIIs (foreign institutional investors) had raised concerns over Tata Steel’s crossholdings in other group firms, which are together valued at over Rs 16,000 crore. FIIs had pointed out that the money thus raised could be useful for the lossmaking steel major, which was looking to sell its European business at the time.