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Tata Sons' $1.5 bn overseas loan plan to push up debt by 50%

TCS buyback to help holding firm of Tata Group companies improve financials

Dev Chatterjee  |  Mumbai 

Bombay House, the headquarters of the Tata group in Mumbai. Tata Sons said its board felt that the move to turn into a private limited firm was in its best interest

Tata Sons’ plan to raise $1.5 billion overseas loan for the first time since 2007 is likely to push up its debt by 50 per cent, but the company’s debt equity ratio will remain below one, thereby giving the company enough headroom to raise funds, according to analysts.

Besides, the share buyback announced by on Tuesday evening will come in handy for the second time in as many years for Tata Sons, to raise funds by tendering part of its 71.92 per cent stake in the software exporter.

stake in is worth Rs 5 trillion as on Wednesday.

is also the biggest contributor to dividend income among all firms, which also helps the holding company take more risks.

The $1.5 billion loan raised by will be used for investments in infrastructure projects and to increase the debt equity ratio to 0.8 from 0.5, according to the analysts quoted above.


The net debt of the company had increased to Rs 219.9 billion as on February 13, 2018, and it had cash and cash equivalents of around Rs 61.3 billion. During 2017-18, received Rs 102.78 billion from buyback of shares announced by

This resulted in an increase in cash accruals during the year, despite the holding company making provisions of Rs 119 billion for losses in Tata Sons has not come out with the full financials for 2017-18.

When contacted, a Tata Sons spokesperson declined to comment.

Recently, a Tata Sons subsidiary won the mandate to construct one of the two phases of the Mumbai to Navi Mumbai trans-harbour link.

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Besides, Tata Sons is expected to invest substantial amounts over the next few quarters to reduce the debt of and this would, in turn, increase the holding company’s debt in the near term, thereby leading to an increase in the ratio of debt to market value of investments.

However, it is unlikely to breach the 15 per cent mark and is expected to correct to around 10 per cent over the medium term, primarily on account of a reduction in debt levels.

Apart from paying off Tata Teleservices’ debt, Tata Sons is also buying back shares from other listed

According to group insiders, Tata Sons will need money to repay the debt of before the latter is merged with Bharti Airtel. Tata Teleservices will retain the enterprise business.

Tata Teleservices has repaid Rs 170 billion of loans of Tata Teleservices to a consortium of bankers led by State Bank of India in January. It still has to repay the remaining Rs 60 billion before concluding the deal with Bharti.

Tata Sons also has to fund Tata Steels’ purchase of Bhushan Steel.

Tata Steel has offered Rs 352 billion to take over Bhushan Steel.

It is also the highest bidder for Bhushan Power and may also takeover Usha Martin’s steel business for another Rs 60 billion. Tata Sons holds 31.64 per cent in Tata Steel.

First Published: Thu, June 14 2018. 07:01 IST
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