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Tata Sons pledges shares worth Rs 2,600 cr in group cos

On Dec 24, Tata Sons pledged 11 mn shares in Tata Motors, 10 mn in Tata Steel and 15 mn TCS with Centralbank Financial Services

Palak Shah & Ashok Divase  |  Mumbai 

Tata Group's holding company, Tata Sons, has pledged shares worth over Rs 2,600 crore in three flagship group On December 24, pledged 11 million shares in Tata Motors, 10 million in and and 15 million in with Centralbank Financial Services Ltd. The value of the shares pledged has been calculated in line with their closing price on December 24.

Market experts say group often bank on for finance, either to fund an acquisition, or to pay debt. Since 2004, has invested Rs 34,000 crore in various group companies, including unlisted ventures.

The current move might give Rs 1,300 crore, as 50 per cent finance is available on pledging. It is anticipated the money would be used to pay the debt of Tata Steel, or for an acquisition such as Orient Express by Indian Hotels.

"Tata Steel's debt repayment could be the more likely reason," said S P Tulsian, independent equity advisor. “would infuse the money in through the preferential allotment route. It would be pre-mature to say the money was being raised for Orient Express acquisition,” he added.

As of June 30, Tata Steel, the eighth-largest steelmaker globally  (by capacity), had $9.3 billion in net debt. Most piled six years ago, when it had acquired the Anglo-Dutch steelmaker Corus for $12.1 billion, now Europe. had raised $875 million through foreign currency convertible alternative reference securities, or CARS, in 2007 to part-fund Corus Plc’s working capital needs. CARSs are similar to foreign currency convertible bonds, which can be converted into equity at maturity. If the share price of the company issuing the bonds falls, the investors can ask for repayment in cash.

is the unlisted holding company of the Rs 4.6-lakh-crore Tata Group. According to its November filing with the registrar of companies, its net profit for 2011-12 fell to Rs 3,146 crore from Rs 3,246 crore a year ago. Total revenue also dropped to Rs 4,726 crore last financial year from Rs 4,857 crore the year before.

The company’s earnings come mainly from dividends received from group companies, and capital gains from the sale of shares. is known to consolidate stake in group when valuations are down in the open market, which it either sells or pledges. Pledging is the main avenue for to raise money. 

Tata Sons’s stake in TCS is around Rs 1.8 lakh crore, six per cent of which was pledged at September-end. In comparison, Tata Sons’ holding in all listed group is Rs 2.4 lakh crore.

First Published: Thu, December 27 2012. 22:10 IST