Tata Sons to pump Rs 3k cr into Tata Teleservices

Tata Teleservices, in turn, is expected to invest the funds in Tata Teleservices (Maharashtra) Ltd's redeemable preference shares worth a similar amount

Tata Sons, holding company of the Tata group of companies, will invest another Rs 3,000 crore into  unlisted subsidiary Tata Teleservices Ltd via the Compulsory Convertible Preference Shares (CCPS) route. The board of Tata Teleservices, led by Chairman Cyrus Mistry, approved the CCPS issue on rights basis on June 24.

Tata Teleservices, in turn, is expected to invest the funds in BSE-listed Tata Teleservices (Maharashtra) Ltd’s redeemable preference shares worth a similar amount. The fresh fund infusion into loss-making Tata Teleservices comes in the backdrop of the London Court of Arbitration, asking the Tatas on June 23 to pay $1.17 billion (Rs 7,859 crore) to its partner Docomo to buy back its 26.5 per cent stake.

In the past two years, the Tatas have invested Rs 4,500 crore in Tata Teleservices’ two CCPS issues, so that the company meets its financial obligations to banks. The Tatas own 60 per cent stake in the company, while Docomo owns 26.5 per cent. The rest is owned by minority shareholders. The conversion of CCPS would increase Tatas’ stake.

When contacted, a Tata Sons spokesperson declined to comment.

The Tata Teleservices board also approved the accounts for FY16, which show marginally lower losses than last year. The firm made a loss of Rs 3,386 crore on revenue of Rs 10,662 crore for FY16, compared to a loss of Rs 3,846 crore on revenues of Rs 10,942 crore reported in FY15.

With continuous losses, the Tatas were looking to merge their operations with other telecom operators in India but have not received any firm offer as yet. The company was in talks with Norwegian multinational Telenor in the past but no announcement was made.

 

The previous fund infusion by the Tatas was used by Tata Teleservices to repay loans to banks and financial institutions. In March last year, the company participated in the spectrum auction and won some in Andhra Pradesh, Delhi and Haryana for Rs 4,034 crore.

Of this, the company has already paid Rs 1,059 crore and has exercised the option to pay the balance Rs 2,975 crore under the deferred payment scheme offered by the department of telecommunications.

For Tata Sons, Tata Teleservices is turning out to be a big drain on its income, boosted mainly by dividend from India’s largest software exporter, Tata Consultancy Services (TCS).  Thanks to TCS, Tata Sons earned a bumper income of Rs 13,206 crore for FY15, compared to the previous year’s Rs 5,429 crore.