Tata Sons avoids mandatory listing after repaying Rs 20,000 crore debt

Tata Sons, the holding company of the Tata Group, has voluntarily surrendered its certificate of registration to the Reserve Bank of India (RBI)

To remain an unlisted entity, Tata Sons, the $410-billion holding company of the Tata Group, has voluntarily surrendered its certificate of registration to the Reserve Bank of India (RBI) after repaying over Rs 20,000 crore in debt, according to a report by The Economic Times. This decision allows Tata Sons to maintain its status as a closely held company, sidestepping the need to list its shares on the stock exchange, which would have been required under RBI regulations had the debt remained.

The repayment, which amounts to Rs 20,300 crore, marks a significant reduction in Tata Sons’ liabilities, excluding only non-convertible debentures and preference shares worth Rs 363 crore. To cover these remaining obligations, Tata Sons has allocated Rs 405 crore in deposits with the State Bank of India (SBI) and has provided an undertaking to the RBI as part of the surrender of its registration certificate.

Tata Sons surrenders its NBFC registration

The RBI classified Tata Sons as a Non-Banking Financial Company – Upper Layer (NBFC-UL) in September 2022. Under this classification, companies are required to list within three years. However, with the substantial debt repayment, Tata Sons has significantly lowered its promoter risk profile, thereby exempting it from the listing requirement and allowing it to relinquish its NBFC registration.

Tata Sons FY24 performance, debt, and dividend

The financial year ending March 2024 saw Tata Sons achieve a 57 per cent surge in net profits at Rs 34,654 crore. Revenues also witnessed a 25 per cent increase to Rs 43,893 crore from Rs 35,058 crore in the previous year.

 

As of March 31, 2023, the company had a net debt of Rs 20,642 crore. By March 31, 2024, this had been converted into a net cash position of Rs 2,670 crore. In the previous fiscal year, the company had already reduced its debt by 25 per cent.

Tata Sons declared its highest-ever dividend of Rs 35,000 per share for its shareholders. The Dorabji Tata Trust, which holds a 28 per cent stake, and the Ratan Tata Trust, with a 24 per cent stake, are the largest beneficiaries. Other shareholders include Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power.

Tata Sons’ substantial dividend distribution was bolstered by nearly Rs 24,000 crore in dividends received from 13 of its listed companies, with Tata Consultancy Services (TCS), India’s second-largest company by market value, contributing approximately Rs 19,000 crore. Tata Motors and Tata Steel also made significant contributions of Rs 2,000 crore and Rs 1,450 crore, respectively.

Tata Sons debt reduction

A key factor in Tata Sons’ debt reduction was the sale of shares in TCS, India’s largest software services exporter. In March 2024, Tata Sons sold 23.4 million TCS shares, raising about Rs 9,300 crore. This followed an earlier transaction in December 2023, where the company raised over Rs 12,000 crore by tendering 29.6 million shares in a TCS buyback. These sales have slightly reduced Tata Sons' stake in TCS from 72.38 per cent in December 2023 to 71.74 per cent by March 2024, the report noted.

The company’s total expenses also saw a significant decline of 27 per cent in FY24, dropping to Rs 2,776 crore from Rs 3,794.70 crore in FY23. Meanwhile, the return on equity, before exceptional items and tax, stood at 38.15 per cent for FY24, slightly down from 39.19 per cent in the previous year.

As of 31 March 2024, Tata Sons’ total investments stood at Rs 1,44,711 crore, an increase from Rs 1,30,286 crore the previous year. The market value of its listed investments rose by an impressive 35.7 per cent in FY24, reaching Rs 15.21 trillion compared to Rs 11.21 trillion in the prior year.