Tata Sons avoid mandatory listing at stock exchange by repaying Rs 20,000 crore debt
Tata Sons avoid mandatory listing at stock exchange by repaying Rs 20,000 crore debt
Tata Sons declared its highest-ever dividend of Rs 35,000 per share for its shareholders.
To remain an unlisted entity, Tata Sons, the $410-billion holding company of the Tata Group, has voluntarily surrendered its certificate of registration to the Reserve Bank of India (RBI) after repaying Rs 20,300 crore in debt.
This decision allows Tata Sons to maintain its status as a closely held company, sidestepping the need to list its shares on the stock exchange, which is required under RBI regulations had the debt remained.
The repayment excludes only non-convertible debentures and preference shares worth Rs 363 crore. To cover these remaining obligations, Tata Sons has allocated Rs 405 crore in deposits with the State Bank of India (SBI) and has provided an undertaking to the RBI as part of the surrender of its registration certificate.
The RBI classified Tata Sons as a Non-Banking Financial Company – Upper Layer (NBFC-UL) in September 2022. Under this classification, companies are required to list within three years. However, with the substantial debt repayment, Tata Sons has significantly lowered its promoter risk profile, thereby exempting it from the listing requirement and allowing it to relinquish its NBFC registration.
The financial year ending March 2024 saw Tata Sons achieve a 57 percent surge in net profits at Rs 34,654 crore. Revenues also witnessed a 25 percent increase to Rs 43,893 crore from Rs 35,058 crore in the previous year.
As of March 31, 2023, the company had a net debt of Rs 20,642 crore. By March 31, 2024, this had been converted into a net cash position of Rs 2,670 crore. In the previous fiscal year, the company had already reduced its debt by 25 percent.
Tata Sons declared its highest-ever dividend of Rs 35,000 per share for its shareholders. The Dorabji Tata Trust, which holds a 28 percent stake, and the Ratan Tata Trust, with a 24 percent stake, are the largest beneficiaries. Other shareholders include Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power.
Tata Sons’ substantial dividend distribution was bolstered by nearly Rs 24,000 crore in dividends received from 13 of its listed companies, with Tata Consultancy Services (TCS), India’s second-largest company by market value, contributing approximately Rs 19,000 crore. Tata Motors and Tata Steel also made significant contributions of Rs 2,000 crore and Rs 1,450 crore, respectively.
A key factor in Tata Sons’ debt reduction was the sale of shares in TCS, India’s largest software services exporter. In March 2024, Tata Sons sold 23.4 million TCS shares, raising about Rs 9,300 crore. This followed an earlier transaction in December 2023, where the company raised over Rs 12,000 crore by tendering 29.6 million shares in a TCS buyback. These sales have slightly reduced Tata Sons’ stake in TCS from 72.38 percent in December 2023 to 71.74 percent by March 2024, the report noted.
The company’s total expenses also saw a significant decline of 27 percent in FY24, dropping to Rs 2,776 crore from Rs 3,794.70 crore in FY23. Meanwhile, the return on equity, before exceptional items and tax, stood at 38.15 percent for FY24, slightly down from 39.19 percent in the previous year.
As of 31 March 2024, Tata Sons’ total investments stood at Rs 1,44,711 crore, an increase from Rs 1,30,286 crore the previous year. The market value of its listed investments rose by an impressive 35.7 percent in FY24, reaching Rs 15.21 trillion compared to Rs 11.21 trillion in the prior year.
