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Tata Sons to sell 0.65% equity in TCS through block deals
Tata Sons the parent company of 29 listed companies of Tata Group which includes TCS also, has announced that it will sell 2.34 crores shares or 0.65% equity in TCS through block deals. What is meant by block deal, we’ll cover later in the article. For now, the reason behind this mega deal is to raise $1.1 billion as reported by moneycontrol on March 18. JP Morgan and Citi group are the two joint bookrunners of the proposed share sale.
As of December 2023, promoters holds 72.41 percent stake of which Tata Sons hold 72.38 percent stake in TCS. Currently, the market capitalisation of TCS is 15 lakh crore and is second most valued-listed company after Reliance Industries of Mukesh Ambani.
Some reports suggest that the deal is happening to avoid Tata Sons’s IPO. However, the company has not yet officially certify this news.
Why Tata Sons wants to avoid its IPO?
The stocks of Tata group have been in spotlight in March because a note from Spark Capital mentioned that Tata Sons may go public by September 2025 as it will complete three years of getting notified as an upper-layer NBFC by Reserve Bank of India.
The company wants to remain private because there are reasons for it:
- Company can have greater independence and flexibility in decision making. Being a publicly listed company there is a lot of scrutiny and restrictions by the regulator.
- After listing, the company will have to be more transparent and will have to disclose more details about how the money comes is getting used which can be a big concern for the company especially regarding strategic initiatives and investments.
- One more reason for avoiding the IPO, they will have to change the shareholding composition and governance structure of Tata Group which will not be an easy task
How Tata Sons operates?
Tata Sons private limited is the primary holding company of the Tata group. It controls 29 publicly listed companies of Tata Group which accounts for 31.6 lakh crore of combined market capitalisation. It is mentioned on the Tata Sons website that Each Tata company or enterprise operates independently under the guidance and supervision of its own Board of Directors.
Mr. JRD Tata in 1973 said about Tata Sons governance philosophy, “The Tata philosophy of management has always been, and is today more than ever, that corporate enterprises must be managed not merely in the interests of their owners, but equally in those of their employees, of the consumers of their products, of the local community and finally of the country as a whole.” And it seems like the company still follows each and every word of its great leader.
Tata Sons is the primary investment holding company and promoter of its group operating companies, mentioned in the website.
About 66% of the equity share capital of Tata Sons is held by philanthropic trusts, which support education, health, livelihood generation, and art and culture. It was established in 1868 by Jamsetji Nusserwanji Tata which is the oldest and largest conglomerates of India . Natarajan Chandrasekaran is the chairman of Tata Sons right now and it is located in Mumbai.
What is a block deal?
A block deal is a transaction in which two parties buy or sell a large number of securities usually stocks or bonds outside of the open market with a pre-arranged price.
Block trades usually takes place out of exchange so that the impact of transaction on security’s market price get minimized.
In case of TCS block deal, Tata Sons has offered 2.34 crore shares of TCS at a price of ₹4,001 per share to raise $1.1 billion. The offered price of TCS is at a discount of 3.6 percent. As on March 18, TCS’s share on BSE is closed 1.8 percent lower at ₹4,144.25.
