By Sarthak Agrawal
Tata Group is an Indian multinational conglomerate holding company that has its headquarters in Mumbai. It was founded in 1868 by Jamsetji Tata. The company made its mark in the global market by purchasing many foreign companies which garnered international recognition. Tata Consultancy Services is an IT services and consulting company owned by the Tata group and is the largest software developer in Asia. The total equity of TCS is a little more than 13 billion dollars. Tata Sons Ltd., the holding company for Tata Consultancy Services, is selling about $1.25 billion of its stake in the software services provider.
Value of Tata’s shares
Tata Sons have put up about 28.27 million shares of Tata Consultancy up for sale, approximately a 1.48% of their stake, after the market closed on Monday, the 16th of March, according to the terms for the deal obtained by Bloomberg. The company had decided to sell the shares at a price range of Rs. 2,872 to Rs. 2,925 per share. The terms show Citigroup Inc. and Morgan Stanley as the bankers for the sale of these shares. Tata Consultancy, whose 73.5% equity is owned by Tata Sons, rose 0.57% to Rs. 3051.85 on BSE earlier on Monday.
The holding company, Tata Sons, is also seeking an offshore syndicated loan, as it is trying to clear expensive debt from their telecommunications unit. Tata Sons will use the money raised to pay creditors of its wireless division, according to a person who has information on the matter. The company will also use the funds to raise its stake in some of its units in an attempt to reduce the influence of other equity holders.
Getting more shares
The conglomerate has been meaning to increase its stake over time in five of its biggest businesses, which include Tata Chemicals and Tata Steel. Tata Sons are also planning on buying an additional 6.6% stake in Indian Hotels Co, which was owned by Tata Trusts, according to a stock exchange filing in the current month of March. Last year, it increased its equity in Tata Motors. The price range represents a 4.2 to 5.9% discount to its last close.
Sudden fall of shares
Shares of Tata Consultancy fell by about 5.9% on Tuesday’s intra-day trading. They were down 4.9% on the Bombay Stock Exchange and was headed for the biggest decline on a single day in more than a year, at 1.20 pm.
If Tata is able to clear off its debt in these areas then, it should provide them with a good chance to consolidate their hold on their other assets and companies. However, the move has to be made fast as the falling market price of Tata Sons cannot be a good sign and the conglomerate may end up losing more stake than initially planned, which can incur huge losses on the company.