After a lull, Tata Sons buys additional stake in subsidiaries

Tata Group's holding company ends FY21 with higher stake in key arms

Tata Sons, the Tata group’s holding company, is closing financial year 2020-21 (FY21) with acquisitions of stake in AirAsia India from Tony Fernandes’ AirAsia Berhad, the defence business of Tata Power, and additional stake in Tata Communications from the government of India.
 
While the $1.2 billion acquisition of online grocery retailer Big Basket is routed via a subsidiary, insiders said this will help Tata Sons consolidate its stake in key subsidiaries and increase its presence in critical sectors like financial services, and infrastructure.
 
Apart from raising stakes in subsidiaries, Tata Sons is also paying the dues of Tata Teleservices and Tata Capital as the fiscal year-end deadline looms for both. A bulk of these investments comes from the Rs 6,127-crore dividend it received from Tata Consultancy Services, according to data.
 
Tata Sons paid $37.6 million to increase its stake in Air Asia, and spent another $144.5 million to buy the defence business of Tata Power in the current fiscal. It also raised its stake in Tata Communications by 10 per cent by paying $470 million (Rs 3,400 crore).
 
The holding company has consistently raised stake in subsidiaries after N Chandrasekaran took over as chairman in 2017, but it has picked up pace in the current fiscal. It was also in talks to acquire coffee chain Coffee Day Enterprises and the coffee estates of its late promoter, but talks stalled over valuation.

 
Bankers said Tata Sons will also have to pay 10 per cent of AGR (adjusted gross revenue) dues to the Centre on behalf of its subsidiary Tata Teleservices by month-end, according to the Supreme Court judgment. It will also have to shell out funds for its financial services business.
 
In FY19, Tata Capital received capital infusion of Rs 2,500 crore from the parent. In December 2019, Tata Sons infused equity of Rs 1,000 crore in TCL, and funds have been invested in the current financial year too.
 
“There were additional fund requirements for the infrastructure and real estate companies also,” said a banker asking not to be quoted. Tata Sons has infused Rs 2,375 crore till June 30, 2020, in Tata Realty and Infrastructure with Rs 1,200 crore infused in FY20.