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Tatas hit cash trail
- Holding firm sells TCS stake to raise Rs 900 cr

Mumbai, Nov. 14: Tata Sons Ltd, the holding company of the Tata group, today sold 85 lakh shares of Tata Consultancy Services (TCS), leading to speculation that the money garnered will be used to fund the Corus buyout.

Tata Sons raised over Rs 900 crore from the sale.

While this transaction was conducted through a block deal on the Bombay Stock Exchange (BSE) today, over 70.95 lakh shares were picked up by HSBC Global Investment Funds, Mauritius, at a price of Rs 1,095 per share.

Though the identity of the other buyer could not be ascertained, the sale constituted 1.09 per cent of Tata Sons’ holding in Tata Consultancy Services and 0.86 per cent of the company’s total equity. During the period ended September 30, Tata Sons held 79.5 per cent in TCS.

What sparked the speculation that the money raised from the deal would be used to finance the Corus acquisition, is that Tata Sons has been consolidating its hold over key group companies by mopping up shares from the market or raising shareholding by other means.

Apart from buying shares of Tata Chemicals from the open market in July, the board of Tata Steel approved a proposal to offer securities to Tata Sons on a preferential basis.

It offered 2,70,00,000 shares at a price of Rs 516 apiece involving an amount of Rs 1,393.20 crore apart from 2,85,00,000 warrants, where each warrant would entitle Tata Sons to subscribe to one share of the company against payment in cash.

Last month, the board of Tata Steel agreed on a £4.3-billion ($8.04 billion) takeover bid for the Anglo-Dutch steelmaker.

However, Tata Steel’s acquisition of Corus Group Plc will come at a cost of over $10 billion (£5.33 billion) as it also intends to refinance the existing debt of Corus, including its public debt.

Tata Steel had also announced that it would pay £126 million into the company’s pension scheme.

However, it is still not clear how the funds realised from today’s bulk deal fits into the Corus transaction. This is because Tata Steel officials had announced that the deal would be financed through a cash infusion of $2 billion from Tata Steel and the rest coming from debt.

Tata Steel had said to finance the balance of the consideration due under the Corus acquisition, Tata Steel UK will raise senior, mezzanine bridge and working capital loan facilities of a total aggregate amount of £3.3 billion.

It added that this will include senior term loan facilities of £1.600 billion, a £350-million senior revolving credit facility and a £1.35-billion mezzanine bridging loan facility, which has been jointly arranged and fully underwritten by Credit Suisse, ABN Amro and Deutsche Bank.

The equity infusion of $2 billion, which Tata Steel proposes to make, will be funded partly from its internal accruals with the rest coming from the preferential offer made to Tata Sons recently.

Corporate observers tracking the Tata group say funds generated from today’s bulk deal may be used to repay a part of the debt that will be incurred from the Corus buyout.

However, there are others who aver that the Tatas have been on a massive expansion spree in many other industries as well and that the $200 million generated from the transaction may be used to fund them.

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