Tata Sons Ltd, the holding company of the Tata group, is looking to raise up to $1.5 billion in external commercial borrowing (ECB) in the next few weeks, two people directly aware of its fund-raising plans said.
Tata Sons plans to use the funds partly to subscribe to the forthcoming rights issue of Tata Steel Ltd and also repay a part of the outstanding debt of Tata Teleservices (TTSL), which is in the process of merging with Bharti Airtel Ltd, the people cited above said on condition of anonymity.
“Tata Sons has received approval from the Reserve Bank of India (RBI) for the proposed ECB and has begun discussions with foreign lenders to raise the funds,” said the first person cited above.
ECBs are loans given by non-resident lenders to Indian borrowers in foreign currency. Under the current regulatory framework, ECBs can be raised either through the automatic route, which is limited to certain sectors, or under the approval route, for which the RBI’s permission is necessary.
In December, Tata Steel’s board approved a rights issue of Rs12,800 crore, primarily to fund the expansion of its Kalinganagar facility by 5 million tonnes per annum (mtpa) to 8 mtpa. The company has said the expansion will be completed in four years and funded through a mix of debt and equity.
“Post the rights issue, Tata Sons wants to retain its stake in Tata Steel at the current level for which it will have to infuse additional equity,” said the second person cited above.
An email sent to Tata Sons requesting comment did not elicit a response till press time on Tuesday.
“Apart from subscribing to the rights issue, the funds raised through ECB will be also used to repay a part of the Rs22,000 crore debt of Tata Teleservices,” the second person said.
In October, Tata Sons agreed to sell its consumer mobile business to India’s largest telecom operator Bharti Airtel in a debt-free, cash-free deal.
On 11 January, a report in The Economic Times, citing people aware of the matter, said that the Tata group had repaid around Rs17,000 crore to various banks towards the outstanding debt of Tata Teleservices.
Tata Sons, founded in 1917 by Tata group’s founder J.N. Tata, is the principal holding company for the Tata group and owner of the Tata brand, and income from dividends and profit generated on sale of investments constitute the principal revenue source for the company, along with royalty fees earned from group companies.
Tata Sons’ equity investments are spread across seven major industry segments and include flagship concerns such as Tata Consultancy Services Ltd, Tata Steel, Tata Power Co. Ltd, Tata Motors Ltd, Tata Chemicals Ltd, Tata Teleservices Ltd, and Tata Global Beverages Ltd, among others.
Mint had reported in September that the Tata group under chairman N. Chandrasekaran has begun a process of rationalization, drastically pruning the number of firms in its portfolio and exiting non-performing and non-profitable businesses and consolidating holdings in some group companies under the ‘One Tata Plan’.
Tata Sons spent close to Rs4,000 crore in acquiring additional stakes in various group firms since the removal of former group chairman Cyrus Mistry in September 2016, Mint reported in September.
According to recent corporate filings, for the 12 months to March 2017, Tata Sons reported a profit after tax of Rs824 crore on an operating income of Rs9,950.4 crore. The firm reported a profit of Rs3,013.1 crore against Rs7,973.5 crore the year before.
Source: Mint