On a strong foundation

Mumbai, May 29: Tata Sons ? the holding company of the Tata group ? will hardly face problems in mobilising resources to fund the expansion plans of leading group firms this year.

This is because the group companies have already raised resources individually through foreign currency convertible bonds. Surging internal accruals in the automobile, steel and hotel businesses have also helped to a large extent.

The investments by the group companies could add up to Rs 10,000 crore in 2005-06 ? probably the biggest amount allocated by the Tatas during a year.

The group has set aside the largest chunk of around Rs 3000 crore for its mobile telephony business, while the ongoing steel projects could attract around Rs 2500-Rs 3000 crore. Tata Motors could line up investments worth Rs 1500 crore. The Tyco Global acquisition alone will cost Rs 1000 crore.

Tata Power will see fresh investments of Rs 500-1000 crore during the year.

Except for the telecom business, which still needs the support of Tata Sons, the other group companies can garner funds on their own.

The equity investments of Tata Sons in group companies is valued close to Rs 65,000 crore. Market borrowings, by contrast, are only Rs 2200 crore.

Soon after divesting part of its stake in Tata Consultancy Services (TCS), Tata Sons has invested Rs 1200 crore in the three-year capital gains bonds and has parked Rs 600 crore in various mutual fund schemes. As a result, the net debt exposure for the main holding company is a little over Rs 1000 crore, according to experts.

Tata Sons holds over 80 per cent in TCS. If the second American depository share (ADS) issue of Infosys is an indication, even Tata Sons as the majority shareholder of TCS can raise upwards of a billion dollars without much effort in overseas markets. “Getting a company listed for the first time is the most difficult. After that, it's a breeze,” an analyst said.

However, if the group decides on a second TCS float, it will have to wait till September, when the lock-in period after the company’s IPO ends.

Tata Sons will probably earn a dividend income of around Rs 1,000 crore from the 80-odd group companies it controls. Moreover, Tata Steel and Tata Motors are reaping the benefits of an excellent year. Earlier, the group had to make one-time investments, like the Rs 2600-crore infusion in VSNL.

“When Tata Motors had invested Rs 1,700 crore in its car business, it was touted as a make-or-break venture for the automobile company,” an observer said. “Now, it will spend Rs 1,500 crore during the year without any fuss,” he added.

Tata Steel has shareholders’ approval to raise close to Rs 5,000 crore at a short notice. The mode of raising funds is yet to be decided. Probably, the amount will come in handy when it firms up plans to buy a coal mine and expand in Orissa.

Bangla plan

The Tatas will start the second round of negotiations with the Bangladesh government next month for its $2.5-billion investment, officials told PTI today.

They said the first round of 3-day talks ended Thursday and the second round was expected to start from June 19.

Media reports said the two sides ended their talks on key issues, but there were differences in some areas. “Both the government and the Tata group are very much positive as both the sides are progressing gradually towards the complex investment deal,” Aklan Rosling, executive director of Tata Sons, was quoted by The Daily Star.