Tata Sons Announces Sale of 0.6% Stake in TCS for Over ₹9,300 Crore

Tata Sons, aiming to alleviate its debt, plans to sell 0.65% equity in Tata Consultancy Services (TCS) for ₹9,362.3 crore. This move precedes a potential IPO, with related stocks rallying. TCS dividends, contributing 95% of FY23 revenue, highlight its strategic importance within Tata’s asset portfolio.

Fundraising Strategy

• Tata Sons plans to offload 2.34 crore shares, constituting 0.65% equity of TCS, for ₹9,362.3 crore.
• The offer price for offloading is set at ₹4,001 per share, aiming to raise at least ₹9,200 crore.
• This action is part of a broader strategy to reduce the consolidated borrowings of Tata Sons, which stood at ₹1.58 lakh crore as of March 2023.

Impact on Tata Sons’ Financials

• Tata Sons’ revenue for FY23 was primarily driven by dividend income, which increased by 189% to ₹33,252 crore.
• TCS, the group’s cash cow, contributed significantly to this dividend payout, with a dividend payout ratio of 158% in FY23.
• Tata Sons’ net profit for the year saw a substantial increase of 29% to ₹22,132 crore.

Market Valuation

• Tata Sons’ holdings in various listed companies are valued at ₹16 lakh crore, with TCS alone accounting for over ₹10 lakh crore.
• Additionally, Tata Motors holds significant value, with Tata Sons’ current investment pegged at ₹1.6 lakh crore.