Tata Group Stocks Tumble Following Tata Sons Block Deal – Check Details (image source:iStock)
Tata Group’s holding company, Tata Sons, executed a block deal on Tuesday, offloading approximately 2.02 crore shares, equivalent to 0.6 per cent equity in Tata Consultancy Services (TCS). This move led to a 3 per cent decline in TCS shares, dropping to Rs 4021.25 per share on the Bombay Stock Exchange (BSE). While Tata Motors lost over 1.30 per cent reaching Rs 956 per share. The group-owned Tata Power dropped nearly 2 per cent reaching Rs 387 per share.
Tata Sons Block Deal Details and Value
The block deal is estimated to be valued at around Rs 9,000 crore, based on an average share price of Rs 4,043 per share. Tata Sons had earlier initiated the process of the block deal, offering up to 2.34 crore shares of TCS at a floor price of Rs 4,001 per share, indicating a discount of 3.65% from Monday’s closing price. However, the final confirmation of the buyer and seller is pending until the stock exchanges release official data later in the evening.
Tata Sons’ Stake and Strategic Moves
Tata Sons holds a 72.38 per cent stake in TCS, making it India’s largest software services exporter and the second most valued listed company, boasting a market capitalization of Rs 14.6 lakh crore. While the exact reason behind the stake sale remains undisclosed, it is speculated that Tata Sons aims to reduce debt and explore investments in emerging sectors such as semiconductors. Moreover, the move may also be driven by efforts to circumvent regulations set by the Reserve Bank of India (RBI) regarding the listing of ‘upper layer’ non-banking finance companies (NBFCs) on stock exchanges.
Debt Reduction Strategy and Regulatory Compliance
With borrowings exceeding Rs 20,000 crore, Tata Sons seeks to bring down its debt to below Rs 100 crore to avoid falling under the regulatory ambit of the RBI’s Core Investment Company (CIC) rules. This move aligns with reports suggesting that RBI declined to exempt Tata Sons, potentially setting a precedent for similar requests from other corporate holding entities.
Ownership Structure and Market Value
Tata Sons’ ownership primarily rests with the Dorabji Tata Trust (28 per cent) and the Ratan Tata Trust (24 per cent), with additional cross-holdings across various Tata Group companies. Other notable shareholders include Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power. The Tata Group stands as India’s most valued conglomerate, with the combined market value of all listed entities surpassing the Rs 30-lakh crore mark, with TCS alone contributing to half of this value.
