 "The Tata group's unlisted financial services businesses have reported hefty profits for the year, with Tata Capital, the group's financial services business, reporting a profit of Rs 2,492 crore on revenues of Rs 13,309 crore, as per Tata Sons' annua")
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The board of Tata Capital, the financial services arm of the Tata Sons, is set to meet on Tuesday to discuss plans to raise capital through a rights issue, as per the company’s filings.
This comes as the company faces a deadline to list its shares by September this year, following a directive from the Reserve Bank of India (RBI) that requires all upper-layer Non-Banking Financial Companies (NBFCs) to list by then.
The board’s meeting, to discuss the size and timing of the rights issue, came shortly after the company sought shareholders’ approval in January to amend its Articles of Association (AoA) to align with the provisions of the Companies Act, 2013.
As an NBFC, Tata Capital is required to meet capital adequacy regulations, which dictate the minimum capital the company must hold as a percentage of its risk-weighted assets and risk-adjusted off-balance sheet items.
In its communication to its shareholders, the company emphasised that as its loan portfolio and asset base continue to grow, it will need additional capital to maintain the required capital adequacy ratios. To meet this need, the company plans to raise capital periodically, including through rights issues, the company had said in a communication to the shareholders.
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 "The Tata group's unlisted financial services businesses have reported hefty profits for the year, with Tata Capital, the group's financial services business, reporting a profit of Rs 2,492 crore on revenues of Rs 13,309 crore, as per Tata Sons' annua")
The company did not reply to email queries sent on Friday.
Currently, Tata Capital has a shareholder base of around 29,000. To prevent further dilution of its shareholder base, which could result in non-compliance with provisions of the Companies Act (such as Sections 25 and 42), the company plans to include a clause in its AoA that would disallow shareholders from renouncing their rights in any upcoming rights issues until the company’s equity shares are listed on the stock exchange, the company had said.
Tata Sons, which holds a 93 per cent stake in Tata Capital, is unlikely to dilute its holding below 75 per cent in the planned IPO, as per a Fitch Ratings statement of February 13th.
Apart from Tata Sons, other Tata group companies hold 2.46 per cent in Tata Capital, International Finance Corporation holds 1.91 per cent, and the Employee Welfare Trust holds 1.16 per cent, with the remaining 1.64 per cent held by others. After Tata Capital’s merger with Tata Motors Finance (TMFL), TMF Holdings (a core investment company that owns TMFL) will hold a 4.7 per cent stake in the merged entity.
Interestingly, in addition to the rights issue, the company is also looking to raise ₹15,000 crore ($1.72 billion) through debt, including the issuance of green bonds and non-convertible debentures. The board approved the debt raising plans earlier this month.
The RBI had also classified Tata Sons as a NBFC upper layer but the Tata group company has pre-paid all its debt and has applied to the RBI seeking an exemption.
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