Tata Sons plans to buy 13% stake in Tata AutoComp for Rs 2,122 crore

Tata Sons holds 40 per cent stake in Tata AutoComp while Tata Motors owns 26 per cent

Tata Sons, the holding company of Tata Group, plans to acquire a 12.65 per cent stake in Tata AutoComp Systems (Taco) for Rs 2,122 crore from Tata Capital at an equity valuation of Rs 16,800 crore, according to Tata Capital’s filings.

Currently, Tata Sons holds a 40 per cent stake in the auto components firm Taco, while Tata Motors owns 26 per cent. The rest of the stake is held by other Tata companies. An email sent to Tata Group on Friday did not elicit any response.

The transaction is expected to be completed before the end of the ongoing financial year. In its filings, Tata Capital said that to support its business growth with a strong capital adequacy ratio and ensure smooth operations, it has entered into and may enter into various transactions with Tata Sons. These include the sale of investments, brand equity and business promotion contribution, availing/rendering of services, and other transactions for the furtherance of business, including lending and borrowing of funds.

“The company holds equity investment in Tata Autocomp Systems and has from time to time sold part of the said investment to Tata Sons in various tranches. As of April 1, 2024, the company held 12.65 per cent equity shareholding of Taco. In June this year, the company sold part of this equity investment – 5.08 per cent to Tata Sons for Rs 850 crore and now proposes to sell the balance equity investment in Taco, i.e, 7.57 per cent to TSPL for Rs 1,272 crore,” Tata Capital said.

It added that an independent valuation of Taco was conducted for the transaction and the transaction was referred to its audit committee of the Board. Tata Sons currently owns a 93 per cent stake in Tata Capital.

As the aggregate value of the sale of investment and the other transactions with Tata Sons during FY25 is estimated to be up to Rs 2,500 crore, which is approximately 13.76 per cent of the annual consolidated turnover of Tata Capital for FY24, Tata Capital sought its shareholders clearance for the related party transactions.

“The management has provided the audit committee with the relevant details, as required under law, for these related party transactions. The audit committee, after reviewing all necessary information, has granted approval for entering into material-related party transactions with TSPL for an aggregate value of up to Rs 2,500 crore during FY25. The committee has noted that the said transactions will be on an arms’ length basis and in the ordinary course of business of Tata Capital,” the company said.

Bankers said Tata Capital was getting ready for a potential listing after the Reserve Bank of India (RBI) classified the company as a non-banking financial company  (NBFC) placed under the upper layer, which requires it to be listed by September next year. Tata Capital is also in the process of merging Tata Motors’ auto finance arms with itself.

According to an earlier RBI circular, all companies which were classified as NBFC upper layer have to be listed by September 2025. This would have made it mandatory for Tata Sons to list itself. However, during FY24, Tata Sons paid off its entire debt of Rs  21,813 crore and applied to the RBI to declassify itself as an NBFC upper layer, ruling out any potential listing.

Taco holds strategic importance for Tata Group as it is the holding company for the Group’s ventures into the auto components sector. The company has been set up primarily to create captive consumption and foster an ecosystem, and more recently to tap into the electric vehicles market, according to an analysis by Crisil.

According to Tata Sons' annual report for FY24, Tata Sons reported a growth of 25 per cent in its total revenue to Rs 43,893 crore and a profit before exceptional items and taxes of Rs 41,116.51 crore. The holding firm reported a profit after tax of Rs 34,653.98 crore, a growth of 57 per cent over the previous year.