Tata Sons to sell 23.4 mn TCS shares worth Rs 9,362 crore in block deal

Tata Sons is set to divest a 0.65 per cent stake in its flagship Tata Consultancy Services (TCS) on Tuesday in the open market, according to a term sheet. It will offload 23.4 million shares at a floor price of Rs 4,001.

The base price, which is 3.7 per cent lower than the TCS stock’s last close, will enable Tata Sons to raise Rs 9,362 crore ($1.13 billion). JP Morgan and Citi are the investment banks handling the share sale.

This marks the second significant block deal in the domestic markets this month, following British American Tobacco’s (BAT’s) sale of a 3.5 per cent stake in ITC on March 13 to raise Rs 17,485 crore ($2.1 billion).

A Tata group source said the proceeds from the stake sale would be used to pay off debt at the holding firm and help it declassify itself from the Reserve Bank of India’s upper layer tag. This may help Tata Sons avoid listing itself by September next year.

Tata Sons has already witnessed a sharp drop in its net debt to Rs 5,656 crore in the 10 months ended January this year, as its cash reserves went up to Rs 9,516 crore during this period.

At the same time, the Tata group's holding company's gross debt nearly halved to Rs 15,173 crore on a standalone basis (until January 2024).

The RBI had directed NBFC-upper layer tagged-companies to come out with an IPO by September 2025.

An email query sent to Tata Sons on Monday did not elicit any response until the time of going to press.
TCS’ shares fell 1.8 per cent on Monday to close at Rs 4,144 apiece, giving the software exporter a valuation of Rs 15 trillion. Currently, Tata Sons holds a 72.38 per cent stake in TCS, valued at Rs 10.9 trillion.

In December, Tata Sons raised nearly Rs 12,300 crore by tendering shares of TCS in its Rs 17,000 crore buyback. The buyback price was set at Rs 4,150 per share. Since 2017, Tata Sons has raised about Rs 54,000 crore by tendering shares in buyback.

Over the past year, TCS shares have gained nearly 33 per cent, slightly outperforming the Nifty50 index, which has risen 30 per cent.

Recently, Tata Sons has been in the news following brokerage reports suggesting that the holding company will need to list by September 2025 to comply with Reserve Bank of India (RBI) requirements. Tata Sons, registered as a core investment company, is classified as an “upper-layer” non-banking financial company (NBFC) by the central bank.

A report by Spark PWM (formerly Spark Family Office and Investment Advisors) suggested that if listed, Tata Sons could command a market value between Rs 7 trillion and Rs 8 trillion.

Tata Sons has used its dividend income to either write-off bad assets or to fund new ventures, such as e-commerce and its recent foray into the semiconductor sector. The Tata group is setting up the country's first semiconductor fabrication plant in Dholera (Gujarat), in partnership with Taiwan's Powerchip Semiconductor Manufacturing Corporation (PSMC) with an investment of Rs 91,000 crore. Also, Tata Semiconductor Assembly and Test is establishing a chip assembly and testing unit in Morigaon (Assam) with an investment of Rs 27,000 crore.

In FY23, Tata Sons earned a dividend income worth Rs 33,423 crore, accounting for 95.3 per cent of its total income of Rs 35,058 crore for the year.