You are here: Home » Companies » News
Business Standard

LIC to reduce exposure in Tata Sons

A Tata Sons spokesperson declined to comment but insiders said the group is in talks with other lenders on alternative fundraising

Dev Chatterjee  |  Mumbai 

LIC to reduce exposure in Tata Sons

India’s largest insurer, government-owned (LIC), will stop fresh investments in Tata Sons, alongwith all other insurance companies, as the holding company turns private. This is because the (Irdai) bars insurance from investing in any private entity.

According to a source, the life insurance giant is in talks with Irdai to give it some time for reducing exposure in is the biggest investor in Tata Sons’ debt (non-convertible debentures (NCDs)), and as of March 2017, had total NCDs outstanding worth Rs 210 billion with “sizeable” exposure from

In its talks with Irdai, a source said had cited an Irdai ruling in January 2015, when it had directed insurance to treat their exposure to IDFC as exposure to the banking sector, instead of the infrastructure sector. But, Irdai gave insurance a two-year window to reduce their exposure in IDFC’s bonds. This was soon after IDFC received its banking licence and the banking entity was listed separately.

A spokesperson declined to comment but insiders said the group is in talks with other lenders on alternative fundraising.

LIC to reduce exposure in Tata Sons

In September last year, had sought shareholder approval to turn into a private company, which according to the Mistry family — its minority shareholder — was detrimental to their interests. They had moved a petition in the National Corporate Law Tribunal (NCLT) against it.

In November, the NCLT’s Mumbai bench had ruled that can file but not press a plea to become a private company till the next hearing on January 16.

The restriction on comes at a time when Tata Sons’ fund requirements in the coming months will be huge. It would have to raise funds to retain its 32 per cent stake in Tata Steel, scheduled for the current quarter. Beside making an additional Rs 300-billion investment in Tata Teleservices by March this year. Tata Teleservices would use the proceeds to repay own debt.

An official said was always a good investment because of its good credit rating. For the year ended March 2017, had cash reserve of Rs 116 billion. Apart from holdings in other Tata-listed entities, derives financial muscle from its 73.5 per cent stake worth Rs 3.7 trillion in Tata Consultancy Services, which gives it enough financial space to raise funds from other lenders. The company made profit of Rs 8.24 billion on revenue of Rs 102 billion for FY17.

In FY17, Tata Sons’ internal accruals have been lower than in FY16, on account of provision for diminution in value of investments and exceptional items worth Rs 67.7 billion. Primarily to pay damages to NTT DoCoMo to buy back the latter’s 26.5 per cent stake in Tata Teleservices.

The amount of damages payable to NTT DoCoMo was deposited by with the Delhi high court in July 2016. While this led to an increase in net debt as of March 31, 2017, the financial profile of the company remains healthy (see chart), analysts said.

First Published: Wed, January 03 2018. 01:00 IST