Public shareholding rule to bring additional Rs 57,000 crore to Tata Sons

Holding company will need to reduce its stake in TCS from 72% to 65%

Tata Sons, which owns 72.05 per cent stake in Tata Consultancy Services (TCS), could see an additional Rs 57,000 crore in its coffers once the mandatory minimum public shareholding rule of 65 per cent comes into force. 

The Tata group holding company is making capital allocation for its various businesses, including aviation, financial services, and a new e-commerce venture from internal resources, without taking into account the possible TCS share sale.Finance Minister Nirmala Sitharaman announced in the Union Budget on Friday that she had asked the Securities and Exchange Board of India (Sebi) to consider raising the current threshold of minimum public shareholding from 25 per cent to 35 per cent. If the Budget proposal is implemented, it will have to sell 7 per cent stake in TCS to meet the regulatory norms.

Sebi is expected to give at least two to three years’ time for promoters to sell down their stake to 65 per cent. Sebi is examining the modalities and will issue a discussion paper. “Companies such as TCS, which have high market capitalisation, may get more time to meet the norms,” said a lawyer. Till then, Tata Sons will be raising funds via debt in domestic as well as international markets to meet its financial needs. The firm has received permission from the Reserve Bank of India to raise $1.5 billion as overseas loan, which will have a tenure of six years and two months. In the coming months, Tata Sons plans to invest further capital in its two airlines — Vistara and AirAsia India — and in its financial services business. The capital allocation for Vistara and AirAsia has been made so that the combined fleet size of both airlines would increase to 200 aircraft in the next few years, from 50 aircraft. 

The group is also planning to invest heavily in a new e-commerce platform to take on Flipkart and Amazon. The launch of the e-commerce business is expected in a year’s time. In the financial services business, Tata Sons has already invested Rs 2,500 crore till March this year. Tata Capital Financial Services, in turn, plans to raise another $1.5 billion to invest in its consumer lending and auto finance business. On a standalone basis for 2017-18 (FY18), Tata Sons had a debt of Rs 27,454 crore on revenues of Rs 28,306 crore. Its net profit was Rs 873 crore. Its net debt at the end of FY18 was Rs 18,091 crore. The company paid off of its telecom arm debt to banks and government dues worth Rs 50,000 crore this year, Bloomberg reported on Monday.

The group has also indicated that Tata Steel would reduce its debt from Rs 1 trillion to Rs 90,000 crore by the end of current financial year and to Rs 70,000 crore in the next few years. 

Tata Sons is also increasing its stake in group companies and participating in fundraising plans of these companies by investing via rights issue.