Tata Sons to infuse more capital into five firms impacted by coronavirus

FY2021 Budget planning upset in all five firms, funds will be used repay dues, keep them well-capitalised and finance projects

Tata Sons will have to infuse additional equity capital into at least five subsidiaries, including Tata Realty and Infrastructure (TRIL), Tata SIA Airlines, AirAsia India, Tata Teleservices, and Tata Capital Financial Services (TCFSL), in the current financial year to help them meet their financial commitments. The Covid-19 pandemic has upset their budget planning for 2020-21 (FY21).

The investment will be in addition to the Rs 2,375 crore invested in Tata Realty in 2019-20, Rs 3,500 crore in Tata Capital, and a massive Rs 50,000 crore in Tata Teleservices since January 2014. Both airlines are getting additional capital each year from the holding company since inception.

While Tata Sons declined to comment, bankers close to the development said the financials of these companies are feeling the strain of the pandemic and the Tata holding company will have to step in like it did in the previous financial year.

Tata Sons will have to step in as TRIL has around Rs 1,320 crore of repayments due on its non-convertible debentures over FY21 and 2021-22.  “The company is likely to face refinancing risks, with large bullet repayments. However, TRIL has been able to successfully refinance its obligations in the past. With the help of Tata Sons, we do not see any problem,” said a banker close to the development.

The group will have to step in to infuse additional funds into its two airlines grounded since March 24. While Tata SIA Airlines has an order pipeline of 50 narrow-body and six wide-body aircraft, the airline will require funding support from joint venture partners — Singapore Airlines and Tata Sons.

“Since both airlines are generating huge losses and will now need more time to turn profitable, the partners will have to extend additional funding support to meeting working capital requirements and maintaining a liquidity buffer till operations stabilise,” he said.

In the financial year ended March 2019, Tata SIA made a loss of Rs 800 crore, while AirAsia India, which has 30 aircraft in its fleet, had made a loss of Rs 671 crore in 2018-19 (FY19).

TCFSL is also raising additional debt in the current financial year, with its board clearing raising debt worth Rs 15,000 crore. In the earlier financial year, TCFSL’s capitalisation was supported by regular capital infusions by Tata Sons, including Rs 785 crore in 2016-17 and another Rs 575 crore tranche in 2017-18 in the form of compulsorily convertible cumulative preference shares (CCCPS). The parent infused an additional Rs 1,025 crore in the form of CCCPS in FY19. “The fund infusion in financial services will be higher in the current financial year,” said a banker.

Interestingly, Tata Sons will also have to invest additional funds into Tata Teleservices, so that the company can pay its adjusted gross revenue (AGR) dues to the Indian government as ordered by the Supreme Court in October last year.

Tata Sons has infused about Rs 46,595 crore from January 1, 2014, to December 31, 2019, into the business to fund the losses, debt repayments, and capital expenditure. The total AGR dues faced by Tata Teleservices are Rs 13,823 crore and with this, Tata Sons will end up paying Rs 74,000 crore for its telecom foray.

The Helping Hand

• Tata Tele:  Will need funds to pay AGR dues
• Tata Capital: To remain well-capitalised
• Tata SIA, Air Asia:  To pay for aircraft acquisition,
• TRIL: To repay NCDs and new projects