Tata Sons Investments Soar To Rs 899 Crore

The sharp increase is significant in the light of reports that the company may have consolidated its shareholding in many of its group companies through purchase of their shares in the past one year.

Details of companies in whose shares and debentures Tata Sons made the additional investment during 1995-96 are not available.

The latest balance sheet reports huge investments was partially funded by the company's rights issue. Its ordinary shares issued to shareholders went up from Rs 14.97 crore in March 1995 to Rs 17.96 crore in March 1996. There was no increase in the share capital on account of preference shares.

 

Tata Sons' reserves went up to Rs 675.42 crore during 1995-96 from Rs 224.04 crore in the previous corresponding period.

While a part of the reserves build-up was due to the company ploughing back some of its profits, the bulk of the increase came from the issue of the company's shares to other Tata companies at a premium of Rs 99,000 at a face value of Rs 1,000 per share.

Some Tata companies appear to have paid a premium of Rs 25,000 per share to the original allottees as renunciation price. They are Telco, Tata Power, Tata Chemicals, Indian Hotels and Tata Industries.

Tata Sons' share capital increased marginally to Rs 51.86 crore from Rs 48.87 crore. While the ordinary share capital went up to Rs 17.96 crore (Rs 14.97 crore), the preference share capital remained unchanged at Rs 11.90 crore.

The balance sheet reveals the rights issue proceeds and internal generation were insufficient to fund the higher level of investments in shares, debentures and bonds. The gap was met by increased borrowings.

As a result, outstanding loans increased by 97 per cent to Rs 506.23 crore from Rs 256.99 crore.

The company's leveraging, however, was not affected because of the increased net worth consequent to the rights issue. Total outside liabilities as on March 1996 amounted to 0.95 times the net worth.

The bulk of the increase in borrowing was on account of secured loans, which included non-convertible debentures. Unsecured loans increased by Rs 64 crore.

The company's investments towards fixed assets went up to Rs 98.51 crore from Rs 88.27 crore last year.

Tata Sons' current assets as on March 31 1996 was Rs 215.57 crore as against Rs 160.70 crore in the previous year.

Funds disbursed towards loans and advances went up to Rs 98.29 crore from Rs 51.94 crore in 1994-95.

Liabilities during 1995-96 was Rs 134.85 crore as against Rs 92.78 crore during the previous year. Net current assets was Rs 179.01 crore as against Rs 119.86 last year. Shareholders of various Tata group companies, who subscribed to the Tata Sons issue are questioning the investments. If a company had subscribed to 1,000 Tata Sons shares, it needed to invest Rs 10 crore, for which the rate of returns in the form of the dividend of Rs 1,000 per share works out to a rate of return of one per cent or so.

The cheapest funds available to a corporate today are fixed deposits at 15 per cent interest. One can, hence, question the logic behind investing in an unlisted stock at a one per cent interest, a shareholder said.