Tata Sons' net debt burden at eight-year low as cash reserves swell

This comes amid group's bet on semiconductor, EV battery biz

Tata Sons Private Limited, the holding company of the Tata group, witnessed a precipitous drop in its net debt to Rs 5,656 crore in the 10 months ended January this year, as its cash reserves burgeoned to Rs 9,516 crore during this period.

Eight years ago, in 2015-16, Tata Sons reported a net debt of Rs 5,132 crore; from March 2017 until March 2023, this figure was above the Rs 14,700 mark, peaking at Rs 27,437 crore at the end of March 2019, according to data sourced from Capitaline.

The company's gross debt nearly halved to Rs 15,173 crore until January 2024 on a standalone basis, down from a peak of Rs 31,363 crore reported in the financial year ended March 2019.

This sharp turnaround in the company’s debt profile will help the company invest in newer ventures, including semiconductors, electric vehicle batteries, and the aviation business, according to a source close to the development.

Banking sources said the sharp fall in net debt in 2023-24 indicates that the company may soon emerge as a net debt-free company. This is due to a sharp decrease in its cash infusion into the loss-making Tata Teleservices, while dividends and buybacks from its subsidiaries, such as Tata Consultancy Services, have risen substantially.

A significant portion of Tata Sons’ cash over the past six years was used to inject money into Tata Teleservices, as the latter paid off its bank debt and other dues to the Indian government, totaling Rs 60,000 crore, according to a source close to the development. “While several other telecom companies filed for bankruptcy following the adverse 2G Supreme Court order, Tata Sons repaid all bank dues in the past five years of Tata Teleservices,” the source said.

An email sent to Tata Sons did not elicit any response until the time of going to press.

Last year, the Reserve Bank of India (RBI) classified Tata Sons as an upper-layer non-banking financial company (NBFC), making it mandatory for the company to list itself on the stock exchanges by September 2025.

The Tata group has not commented on its initial public offering (IPO) plans, although analysts estimate the company's valuation to be as high as Rs 11 trillion. A recent report by Spark Capital said that Tata Sons could potentially fetch a value of Rs 7-8 trillion, taking into account the current market values of Tata group companies.

Tata Trusts owns a 66 per cent stake in Tata Sons, while the billionaire Mistry family owns an 18.5 per cent stake in the company. An IPO by Tata Sons would provide an exit for the Mistry family, which is currently facing liquidity issues due to high debt. 

Tata Capital, a subsidiary of Tata Sons, has also been tagged by the RBI as an upper-layer NBFC and is required to be listed by September next year. A listing of Tata Capital would lead to cash generation for Tata Sons, which currently owns a 94 per cent stake in Tata Capital.

Last month, the board of Tata Capital approved a massive fundraising exercise of Rs 20,000 crore through non-convertible debentures as the company aims to emerge as a prominent retail lender. Simultaneously, Tata Capital’s home finance subsidiary, Tata Capital Housing Finance, is raising another Rs 8,000 crore to increase its market share in the home loan business. Tata Sons invested Rs 1,000 crore in the first half of FY24 by subscribing to the rights issue of equity of Tata Capital.