India’s major conglomerate Tata Sons has sold a 1.48% stake in IT behemoth TCS to raise nearly Rs 8,200 crore ($1.25 billion) even as the company looks to consolidate its holdings in other auto and steel related group firms. We take a closer look at the billion dollar deal.
India’s major conglomerate Tata Sons has sold a 1.48% stake in IT behemoth TCS to raise nearly Rs 8,200 crore ($1.25 billion) even as the company looks to consolidate its holdings in other auto and steel related group firms. Notably, the company had made the transaction through a block trade on NSE at a discount of nearly 5% from TCSs monday’s closing price of Rs 3,052.15. The deal is seen as a part of Tata Sons’ 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. In September-17, Tata Sons bought equity stakes in Tata Motors, Tata Beverages and Tata Chemicals by picking up shares of these companies from other group outfits. Further, Tata Steel had also announced a joint venture with thyssenkrupp AG which is slated to have have a combined turnover of Rs 1,15,000 crore. We take a closer look at Tata Sons and TCS stake sale.
Tata Sons seeks to pare debt
The business conglomerate seeks to pare down debt from the balance sheet through this transaction, while also invest in other group businesses. Further, Tata Sons will also use the proceeds to pay off creditors of its wireless division (Tata Teleservices), Bloomberg said citing unidentified sources. Tata Teleservices Ltd’s mobile-phone operations was sold to Bharti Airtel Ltd last year in a cash-free and debt-free basis.
Raise holdings in other listed firms
According to a Bloomberg report, Tata Sons will also use the funds to raise its holdings in some listed units. “Tata Sons may buy the stakes from other Tata Group affiliates, which would help to reduce cross-shareholdings,” the news agency reported citing unidentified officials. The company is in midst of a complete overhaul of its cross holdings, with plans to raise its ownership over time in five of its largest businesses including Tata Chemicals Ltd. and Tata Steel Ltd and an additional 6.6 percent stake in Indian Hotels.
Tata Sons to raise additional $1.5 billion
Apart from the major stake sale in TCS, the Tata Sons is is also seeking a $1.5 billion offshore syndicated loan, with the intention to pay down expensive debt at its telecommunications unit, Bloomberg reported last week. After N Chandrashekaran completed one year at the helm of the company, experts say that he will look to focus more on expanding the steel and auto business — the group’s other two cash cows apart from TCS.