Tata Sons to sells 0.65% in TCS to raise 9300 crore
Floor price at 4001 crore per share ;
block deal plan follows 17k cr buyback in November
MUMBAI: Tata Sons Pvt Ltd plans to
raise over a billion dollars by selling a chunk of its shares in Tata
Consultancy Services Ltd, at a time the conglomerate is entering new age
businesses such as semiconductors, e-commerce and phone assembly.
The Tata group holding company plans to sell up to 23.4 million
shares worth 0.65% stake in TCS through block deals to raise 9362 crore. Tata
Sons now holds around 72.4% stake in TCS, India’s second most valuable company.
Shares will be offered at a floor price of 4001 per share, a 3.65%
discount to TCS’s Monday closing price of 4152 on the National Stock Exchange
Following (NSE). Following the transaction, Tata Sons’ stake in TCS will fall
to around 71.7%.
Tata Sons derives its income mainly from dividends and buybacks in
group firms, which it uses to invest in emerging segments or support weaker businesses.
According to Deven R. Choksey, managing director of KRChoksey
Shares and Securities, the Tata group is planning siginificant investments in
renewables and commodity businesses including
steel and power, and TCS is one company that gives it the ability to
raise capital and provide for other businesses.
“Secondly, further amount of capital requirement will come from the
need to develop AI and data analytics capabilities across group companies. The group
firms will need money to develop enabling technologies and get equipped,”
Choksey added.
A Tata group spokesperson did not respond to queries on the
proposed end use of the amount, but a December 2023 ratings release by Crisil
highlighted the group’s focus on new age businesses.
Share of TCS hit a record 4254 on Monday, but closed 1.6% lower at
4152 on the BSE.
TCS share are up 30.6% this fiscal year, against the Nifty 50 Index’s
29% return.
Over the years, TCS, the group’s cash cow, has increased dividend
payments from 26148 crore in FY19 to 42079 crore in FY23, an increase of 44.4%.
It has also conducted several buybacks worth 67000 crore since 2018, at prices
from 2100 per share in June 2018 to 4500 per share in January 2022. Most
recently, in November 2023, it announced a 17000 crore buyback at 4150 per
share. In 2021.
TCS returned about 95% of free cash flow to shareholder. Last year,
it handed out 108.2% of its free cash flow.
pp. In the past three fiscal years, it has handed out $9 billion to Tata Sons to bankroll these ambitious ventures
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