Tata Sons to reduce cross-holdings

Group firms own shares worth ~8,000 cr in other operating companies

Tata Sons, the holding company of the $104-billion Tata group, plans to buy shares worth about ~7,000 crore from group companies that hold shares in other listed group firms.

Companies such as Tata Steel, Tata Chemicals and Tata Power own shares of other group companies. For example, Tata Steel has the largest holding in group companies, valued at ~4,193 crore — with ~3,856 crore in Tata Motors.

Tata Sons will buy some of these stakes and increase its direct shareholding in operating companies. The cross-holding structure of the group has come under the scanner in the past, as investors have said this limits operating companies’ ability to deploy funds in their core businesses. A lot of institutional investors prefer owning companies which are in a single business and do not have stakes in unrelated businesses.

Some of the Tata group companies, including Tata Steel, are under pressure to bring down their debt and are looking to monetise their investments. Selling holdings in group companies would be one more source of raising funds.

Four major operating companies of the group, Tata Steel, Tata Power, Tata Global Beverages and Tata Chemicals, have six investments worth almost ~7,000 crore.

Besides another 22 cross-holdings across various firms account for ~769 crore, based on Friday’s share prices.

“Simplifying the cross-holding structure of the group has been an ongoing process for some time,” said a senior executive at one of the operating firms.

“This could be hastened under the new leadership at Tata Sons,” he added.

The cross-holding is expected to be simplified in the next four quarters, with Tata Sons executing the trades through block deals. Tata Sons declined to comment on this.

On February 21, N Chandrasekaran took charge of Tata Sons as chairman.

Soon after, Tata Sons and NTT DoCoMo told the Delhi High Court, that they had reached a settlement concerning the enforcement of an arbitration award on the exit of the Japanese telecom major from a joint venture between the two companies.

Resolving the cross-holding could be a second major move by Chandrasekaran.

Tata Steel is expected to be the largest beneficiary of the move. The company had ~82,777 crore debt on its books at the end of December — 2.2 times its net worth. If Tata Sons buys its stake in Tata Motors and Tata Power, it would fetch ~4,173 crore.

Tata Sons will participate in the buyback offer from Tata Consultancy Services (TCS) announced last month. The most-valued company of the group and the country’s largest company in terms of market capitalisation announced a buyback of shares worth ~16,000 crore. Tata Sons owns 73.3 per cent in TCS, which would bring ~11,728 crore to Tata Sons, based on Friday’s price.

Tata Sons could use a part of the funds it receives from the TCS buyback to simplify cross-holding structure of the group.

Tata Sons will also have to settle the $1.18-billion dispute with DoCoMo. The amount has already been deposited with the Delhi High Court.