Tata Sons confirms selling 2.34 crore shares of TCS in block deal

Tata Sons on Thursday confirmed that it has sold 2.34 crore shares in its subsidiary Tata Consultancy Services (TCS) in a block deal last Tuesday. The deal is said to be worth around Rs 9,000 crore although the companies have not revealed the average share sale price.

Following the stake sale, holding company Tata Sons’ stake in TCS has fallen to 71.74% from 72.38% earlier.

After TCS shares hit a lifetime high of Rs 4,254.45 on BSE on Monday, investment banker JPMorgan issued the term sheet of a block deal in which Tata Sons was looking to sell 2.43 crore shares of the software services exporter at a floor price of Rs 4,001 per share, which was at a discount of 3.6% to Monday’s closing price.

The impact of the large block deal has been negative on the stock as it fell 4% on Tuesday and is now down about 7% from Monday’s high.

The Tata Group has not officially commented on the rationale behind the stake sale, which is small in percentage equity terms but large in size.

The salt-to-software conglomerate can use the cash thus generated to fund its ambitious growth plans in new businesses like semiconductors. Recently, Tata Sons’ subsidiary Tata Electronics had committed to invest Rs 91,000 crore to build a semiconductor fabrication plant in Gujarat’s Dholera.

The cash could also be used to pare some of the debt of Tata Sons whose FY23 balance sheet shows borrowings of about Rs 20,270 crore. Debt reduction could also help the holding company avoid an IPO.

The market value of Tata Sons’ listed investments is estimated at Rs 16 lakh crore and the book value of the unlisted investments is Rs 60,000 crore. But the market value of unlisted investments could be much higher at about Rs 1-2 lakh crore given the group’s foray into semiconductors and EV batteries, according to calculations done by Spark Capital.

Tata Sons is majorly held by the Dorabji Tata Trust (28%) and the Ratan Tata Trust (24%). However, the group is also known to have several cross-holdings across its companies. Other shareholders include Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power.

The Tata Group is India’s most valued conglomerate with a market value of all listed entities going above the Rs 30-lakh crore mark.