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Tata needs Rs 11k cr for auto, telecom stakes

Group will require funds to retain holding in Tata Motors, buy out Docomo in Tata Teleservices

Dev Chatterjee  |  Mumbai 

Tata Sons, holding company of the $100-billion Tata Group, will need up to Rs 11,000 crore to retain its stake in Tata Motors, buy back NTT Docomo’s stake in the loss-making Tata Teleservices and pay off the telecom company’s loans. This excludes fresh investments planned by Tata Sons in its two airlines and in the defence industry.

Analysts said Tata Sons and other group would need Rs 2,575 crore to maintain its 34.75 per cent stake in Tata Motors, which is coming out with a Rs 7,500-crore rights issue. Besides, the Tatas have sought government permission to buy Japanese telecom major NTT Docomo’s 26.5 per cent stake in Tata Teleservices for Rs 7,250 crore. Tata Sons also provided an undertaking to banks last year that it would pay off Rs 2,000 crore of Tata Teleservices’ debt by 2016. Of this, Rs 1,000 crore was due this year, a banker said.

“A lot of fund requirement for Tata Sons has come at the same time. The group is also building its airline and defence businesses. But due to its good financial profile, fund raising for Tata Sons should not be a problem,” a banker said.

A Tata Sons spokesperson said, “We do not share information on such matters. Suffice to say that from time to time Tata Sons raises funds as part of ongoing activities.”

The group holding firm acquires its financial muscle from its 73.90 per cent stake in India’s biggest software exporter, Tata Consultancy Services, which was worth Rs 3.63 lakh crore on Thursday. Besides, the company had cash and bank balances of about Rs 5,600 crore on March 31, 2014, according to a Tata Sons annual report.

Tata Sons’ low gearing has remained stable over six years, at around 0.5 times on March 31, 2014. Last week, Tata Sons issued Rs 300 crore of bonds that were lapped up by institutional investors.

Tata Sons also holds substantial stakes in all group companies, including unlisted ones such as Tata Sky, Tata Capital, Tata Realty and Tata Starbucks. These are doing well in their sectors and analysts said these equity investments provided flexibility to Tata Sons in raising funds.

The Tatas might look at selling part of their stake in a couple of investments to raise funds although nothing had been finalised, a banker said.

Under Chairman Cyrus Mistry, Tata Sons is planning to restructure operations and invest more in businesses. It has identified growth clusters for the next 10 years, including retail, defence, financial services and infrastructure.

The dividend from TCS remains the main cash cow for Tata Sons. In 2013-14, Tata Sons earned about Rs 4,600 crore from here. In five years, Tata Sons’ incremental investment in group has tracked its dividend income from TCS. The company has invested Rs 18,500 crore in group companies, including unlisted ones, since March 2009. During the same period, it earned Rs 16,000 crore in dividends from TCS, excluding the interim ones in the first quarter of the current financial year. A higher dividend income also shores up Tata Sons’ borrowing capacity.

For 2013-14, Tata Sons reported a profit after tax (PAT) of Rs 3,053 crore on a revenue of Rs 5,399 crore, down from a PAT of Rs 3,714 crore on revenue of Rs 5,736 crore in 2012-13.

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First Published: Fri, January 30 2015. 00:47 IST