Tata Digital to raise Rs 5,000 cr via commercial papers to expand business

Tata Digital, the digital business of Tata Sons, will raise Rs 5,000 crore through a commercial paper as the company looks for funds to expand in e-commerce.

Tata Digital is creating a platform for the Tata Group’s consumer business, acquiring 64 per cent in online grocer Big Basket as expands its ecommerce business.

An email sent to Tata Digital’s CEO Pratik Pal on the company’s fund raise did not elicit any response.

India Ratings and Research has rated Tata Digital’s commercial paper route to raise Rs 5,000 crore as ‘A1+.

“Given the importance of TDL (Tata Digital) in Tata Group’s overall digital aspirations, Ind-Ra expects TDL to not only launch the platform in a timely fashion, but also onboard most of the Tata Group’s flagship consumer brands. Also, the initial funding requirement could be higher towards the platform development expenses and funding operational expenses,” said a said note from India Ratings and Research.

"Ind-Ra expects TSL (Tata Sons) to infuse sufficient equity upfront or in a timely fashion so as to keep leverage level at TDL under check. In the long-term, Ind-Ra expects TDL to garner a meaningful user-base with adequate revenue generation potential, which would maintain TDL’s strategic importance to TSL,” said the note.

TDL’s standalone financials are not material, as it does not have any meaningful operations so far, said the note. It reported revenue of Rs 12.7 crore in FY21 as against Rs 5.3 crore in FY20.  Issued and subscribed shares stood at Rs6,000 million on 31 March 2021. Its EBITDA loss in FY21 stood at Rs306.1 crore as against Rs 57.1 crore in FY20.

The Competition Commission of India (CCI) in April approved Tata Digital’s majority stake in BigBasket. With this approval Tata Digital will give exit to investors Alibaba that holds around 29 per cent stake in the company, along with investors Actis LLP (16.3 per cent), and IFC (4.1 per cent). Tata’s have finalized plans to acquire this stake for about Rs 9,300 crore (about $1.2 billion).

Tata Digital has also made an early investment into online healthcare platform 1mg. According to reports, Tata Digital infused Rs 100 crore in 1mg via compulsory convertible debentures (CCDs).