Tata to sell TCS shares worth Rs. 9,300cr: Here's why
What's the story
Tata Sons is set to sell approximately 2.34 crore shares of Tata Consultancy Services (TCS). The proposed deal is valued at around Rs. 9,300 crore.
The base price for this transaction has been fixed at Rs. 4,001 per share, which is a 3.6% discount from Monday's closing price.
The decision comes amid conjecture that the sale might be part of a fundraising strategy to bypass initial public offering (IPO) of Tata Sons as per Reserve Bank of India (RBI) regulations.
Avoiding IPO
Measures under consideration by Tata Sons to circumvent mega IPO
Tata Sons is considering strategies to reorganize its financial statements in an effort to prevent stock exchange listing.
This follows speculation about the company's plans for a colossal IPO estimated at Rs. 55,000 crore, which would value the parent company at Rs. 11 lakh crore.
The restructuring might involve debt repayment or shifting the holding of Tata Capital to another entity.
This could lead to Tata Sons being deregistered as a core investment company (CIC) and top-tier non-banking finance company.
RBI's mandate
RBI's deadline for listing and Tata Sons's outstanding loans
The RBI has mandated that all top-tier non-banking finance companies, including Tata Sons, must be listed on stock exchanges by September 2025.
Tata Sons currently has outstanding loans amounting to over Rs. 20,000 crore.
If the company can reduce its loans to less than Rs. 100 crore level, it would no longer be subject to RBI's core investment company (CIC) regulations.
This could potentially offer an alternative path for Tata Sons to avoid public listing.
Insights
Market value of Tata Sons and its principal shareholders
The market value of Tata Sons's listed investments is estimated at Rs. 16 lakh crore, while the book value of unlisted investments is around Rs. 60,000 crore.
The primary shareholders of Tata Sons include Dorabji Tata Trust with a 28% stake and the Ratan Tata Trust with a 24% stake.
Other shareholders include Sterling Investments, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power.
The total market value of all its listed entities combined surpasses Rs. 30 lakh crore mark.