TATA Sons has sold about 1% stake in Tata Consultancy Services, the group's biggest company by market cap, to help refinance a $2-billion bridge loan taken by Tata Motors.
Tata Ltd, the UK arm of Tata Sons, has sold 10.34 million shares of TCS in a block deal at Rs 615.04 each. The Tata group held 76.2% stake in TCS as of March 31, 2009. A substantial portion of this, about 73.7%, is held by Tata Sons.
A Tata Sons spokesperson declined to comment on the block deal and its purpose. "We don't wish to comment on the same," replied the spokesperson.
The money raised through this transaction, and possibly others of a similar nature, may be provided to Tata Motors as a loan. Tata Sons may also deposit the money with the banks that provided the $2-billion bridge loan to Tata Motors. The Tata group holds 42% in Tata Motors, of which 29% is held by Tata Sons.
Tata Motors will have to refinance the bridge loan by June, for which it has appointed Citi, SBI and Tata Capital. It is in the process of raising nearly $1.5 billion from foreign lenders while the rest may be organised by stake sales in various companies and raising funds from local banks, said an investment banker. Tata Motors may also sell stakes in unlisted profit-making subsidiaries such as Tata Daewoo Commercial Vehicle Company, HV Excels, HV Transmissions, Tata Motors Finance, Tata Technologies and Telco Construction Equipment.
About two years ago, the group had resorted to a similar exercise to part-finance Tata Steel's $12.9-billion acquisition of Corus.
An industry expert said Tata Motors' stake sale in these firms may depend on valuation. "Tata Motors' fund flow has improved, thanks to the launch of the Nano. It now has the financial capacity to delay the stake sale in profit-making subsidiaries if it does not find the right valuation," the expert said. Tata Motors raised nearly Rs 2,500 crore by selling application forms of the Nano.
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