Tata Sons set to invest Rs 1,432 cr in rights issue of Tata Projects

Conglomerate's engineering and construction company gets board approval for fundraising

Tata Sons, the holding company of the Tata group, is set to invest ₹1,432 crore in the rights issue of Tata Projects, the conglomerate’s engineering, procurement, and construction (EPC) arm. The fundraising effort of Tata Projects aims to raise ₹2,500 crore from its shareholders.

 

The company’s board of directors and shareholders cleared the rights issue on Thursday, according to regulatory filings.

 

Founded in 1979, Tata Projects has three key business segments: energy and industrial infrastructure, urban infrastructure, and services. Tata Sons holds a 57 per cent stake in Tata Projects and the rest is with other Tata group companies, including Tata Power and Tata Chemicals.

 

Tata Projects, after its rights issue, will consider getting listed, said company officials earlier. According to rating agency Crisil, Tata Projects is expected to generate cash accruals of ₹300-400 crore in 2024-25 (FY25), supplemented by an unencumbered cash balance exceeding ₹600 crore as of June 30, 2024. Such resources should be sufficient to meet debt obligations of around ₹544 crore and planned capital expenditure of ₹400-450 crore for the year, said Crisil in August. 

 

Tata Projects’ liquidity is bolstered by moderate utilisation of fund-based bank limits, averaging 64 per cent over the 12 months to June 2024, leaving around ₹1,000 crore in unutilised credit, it said.

 

Tata Sons will invest in Tata Projects from the dividend it is set to receive from Tata Consultancy Services (TCS), India’s largest software exporter, in the first nine months of FY25. TCS has announced a special dividend of ₹66 per share along with an interim dividend of ₹10 for the December quarter. Earlier, it had issued ₹10 per share interim dividends in the first two quarters. Tata Sons will receive ₹24,931 crore in dividend from TCS in the first nine months of the ongoing fiscal.

 

These funds will also support Tata Sons’ subscription to Tata Capital’s rights issue and investments in Tata International. The group plans to list its financial services arm, Tata Capital, by September, aiming to raise up to $1.5 billion through an initial public offering.