Tata Sons repays Rs 20,000-crore debt to ‘avoid’ going public: Reduces stake in TCS and more

Tata Sons, the holding entity of the $410-billion Tata Group, recently sought to voluntarily surrender its certificate of registration to the Reserve Bank of India (RBI) after repaying more than Rs 20,000 crore in debt in a strategic move that allows it to remain an unlisted, closely held company.
The company in its annual report said that it has invested in its new and existing businesses based on their requirement for capital, for growth and for deleveraging their balance sheets.The market value of Tata Sons’ listed investments increased by 35.7% in FY24 to ₹15.21 lakh crore compared to ₹11.21 lakh crore in the previous year.

Why Tata Sons repaid the loans

If these loans were continued, Tata Sons would have been required to list its shares, in compliance with central bank rules. But Tata Sons repaid nearly all borrowings of more than Rs 20,300 crore. As a core investment company that borrows funds from banks and markets to invest in group companies, Tata Sons was classified by the RBI as an NBFC-Upper Layer (NBFC-UL) in September 2022. Under RBI regulations, an NBFC-UL must be listed within three years of such a categorisation. But with the promoter risk profile reducing drastically following the debt repayment, Tata Sons is no longer required to list its stock, having offered to surrender its certificate of registration to the central bank.

Reduced stake in TCS

In March 2024, Tata Sons sold 23.4 million shares in TCS, India’s largest software services exporter, raising about Rs 9,300 crore. Earlier, in December, Tata Sons raised over Rs 12,000 crore by tendering 29.6 million shares in TCS during a buyback. Tata Sons’ stake in TCS has declined from 72.38% in December 2023 to 71.74% in March 2024 following the stake sale.

Received highest dividend from TCS

Tata Sons received nearly Rs 24,000 crore in dividends from 13 of its listed companies, according to data compiled by ET. Flagship Tata Consultancy Services (TCS) contributed around Rs 19,000 crore in dividends to Tata Sons in FY24. They were followed by Tata Motors and Tata Steel, which paid Rs 2,000 crore and Rs 1,450 crore, respectively.
The company has set aside Rs 405 crore in bank deposits with the State Bank of India (SBI) to cover these remaining obligations. Tata Sons also said that it has provided an undertaking to this effect to the RBI along with the surrender of its registration certificate.