TCS Booster: Tata Sons to hike stake in group cos

Started by sukishan, Sep 05, 2009, 08:53 PM

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Tata Sons, the unlisted holding company of the Tatas, plans to raise its stake in some group companies after its dividend from the nation's biggest 
software developer, Tata Consultancy Services Ltd, doubled to Rs 2,000 crores. 

The holding company, owned by Tata group's charitable trusts, will use the dividend income to raise stake in group companies where its holding is low and also fund Tata group's expansion plans, said a source in the group who did not want to be identified. The group holds less than 20% in companies such as Tata Chemicals Ltd and watch-maker Titan Industries Ltd.

The rest of the Tata group's listed companies contributed only Rs 700 crore of the total dividend income of Tata Sons, statistics collated by ETIG shows.

Speaking to ET NOW, R K Krishna Kumar, director, Tata Sons said the company would continue its endeavour to raise stake in all the group companies." That has been a long standing goal. Notwithstanding the ups and down of the economy has seen, we will stick to our cause." He was speaking on the sidelines of a news conference to launch private labels by its retail arm, Infinity Retail.

Tata Sons also benefited from selling a part stake in TCS last September as gains helped it to bail out a rights share sale of Tata Motors Ltd. which received a poor response from investor after its stock price slumped. Tata Sons stake in TCS is now at 73.75% as compared to the 75% holding it had as of March 2008.

Apart from raising stake in group companies, Tata Sons' strategy is to help group companies fund acquisitions and expansion as and when required, the source said. An official spokesperson of Tata Sons declined to comment.

The dividend from the group companies like Tata Motors was down to Rs 106 crore -- thanks to the auto company's expensive acquisition of Jaguar Land Rover which resulted in the company falling into losses. Tata Steel's dividend, on the other hand, was up marginally to Rs 359 crore as compared to last year's Rs 326 crore. This was in spite of huge loss made by Tata Steel's British subsidiary, Corus.

Tata Sons has been raising its stake in Tata group companies in the recent past. Its stake went up in Indian Hotels, Tata Motors, and Tata Steel (See chart).

A statement by Crisil says Tata Sons enjoys strong liquidity thanks to its cash of Rs 2892 crore as on March this year. Crisil further said Tata Sons is expected to continue to fund its participation through a judicious mix of debt and sale of investments. Crisil last rated Tata Sons in July this year while re-affirming its AAA rating of its Rs 8,950 crore non-convertible debentures.
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