Tata Sons had yesterday initiated the process of a block deal to sell up to 2.34 crore shares of TCS at a floor price of Rs 4,001 per share, representing a discount of 3.65% to Monday’s closing price, shows a term sheet issued by JP Morgan and Citigroup – joint book-runners to the deal.
However, a final confirmation of the buyer and seller would be known in the evening when stock exchanges release data.
Tata Sons owns the bulk of 72.38% stake in TCS which is India’s largest software services exporter and second most valued listed company with a market capitalisation of Rs 14.6 lakh crore.
While there is no official clarification for the reason behind the stake sale yet, it is being believed that the fundraising is part of an exercise by the salt-to-software conglomerate to cut down debt, fuel ambitions in newer areas like semiconductors. It could also being done to avoid Tata Sons IPO under RBI rules which mandate all ‘upper layer’ non-banking finance companies (NBFCs) from getting listed on stock exchanges.
After RBI reportedly refused to give an exemption to Tata Sons as it could lead to similar demands from other corporate holding companies, the company has been consulting legal and finance experts to find a solution.Also Read: Tata Sons to sell TCS shares worth Rs 9,000 crore. Is it to dodge the mega IPO?Tata Sons has borrowings worth over Rs 20,000 crore. If it brings down the borrowings to below Rs 100 crore level, it could no more fall under the RBI CIC rule ambit, according to reports.
Tata Sons is majorly held by the Dorabji Tata Trust (28%) and the Ratan Tata Trust (24%). However, the group is also known to have several cross-holdings across its companies. Other shareholders include Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power.
The Tata Group is India’s most valued conglomerate with the market value of all listed entities going above the Rs 30-lakh crore mark. TCS alone contributes to half of the value.
“I think it is a routine booking of profit or reducing stake and they would be using that capital for extraneous purposes, maybe shoring up capital in other stocks or as their philanthropic causes do exceedingly well,” market veteran Sanjiv Bhasin said.
The Tata Group is establishing the country’s first semiconductor fabrication plant at Dholera, in Gujarat, with an investment of Rs 91,000 crore. Tata is also setting up Tata Semiconductor Assembly and Test’s upcoming chip assembly and testing unit in Assam, with an investment of Rs 27,000 crore.
