Tata Sons, the holding company of the Rs 45,000-crore (Rs 450-billion) Tata group, is planning a major buyback of its equity shares.
The buyback will precede the hiving off of Tata Consultancy Services, its software division, into a separate company and the subsequent public offering, which the group hopes will take place in mid-2003.
The plan entailed buying back up to 10 per cent of the subscribed equity base of Tata Sons, a Tata group spokesman confirmed.
"The buyback price has not yet been decided. The proposal is aimed at rewarding all Tata Sons shareholders," he added.
The move will result in a windfall for several of the listed Tata group companies that had participated in Tata Sons' controversial rights issue of 1996.
The investor community then had criticised the Tatas for using money from publicly listed companies to strengthen the balance sheet of Tata Sons, which in turn used the funds to augment its holdings in different Tata companies.
According to information contained in the Tata Sons board resolutions, a copy of which Business Standard has, the closely held Tata Sons' shares were last traded among its shareholders at a price of Rs 720,000 per share (face value: Rs 1,000) on December 14, 2001.
This translates into a 620 per cent appreciation between 1996 and 2001. At the time of the 1996 rights issue, a Tata Sons share was valued at Rs 100,000.
The reference price of Rs 7.2 lakh a share puts the valuation of Tata Sons at Rs 28,800 crore (Rs 288 billion).
The listed Tata companies now hold a 12.77 per cent stake in Tata Sons, of which Tata Engineering and Tata Steel (through the wholly owned subsidiary Kalimati Investments) hold 12,375 shares each. Tata Chemicals holds another 10,237 shares, Tata Power 4,572, Indian Hotels 4,500, and Tata Tea 1,755.
The two main Tata trusts, the Sir Dorab Tata Trust and Sir Ratan Tata Trust, hold over 51.5 per cent shares in Tata Sons, while other trusts hold another 14.35 per cent.
Construction baron Pallonji Mistry has an 18 per cent stake while some individuals, including directors, hold nearly 3 per cent.
The Tatas feel that rewarding shareholders of Tata Sons is important now because the holding company will be reduced to just an investment company when TCS is demerged.
The residual divisions of Tata Sons do not account for much in terms of either revenue or profit. So the valuation of Tata Sons virtually reflects the valuation of TCS.
However, the Rs 28,800-crore valuation of Tata Sons is far less than the Rs 90,000 crore (Rs 900 billion) that an investment bank valued TCS at in 2000 at the height of the technology boom.
TCS to be parked with Orchid Print
Tata Sons has set the ball rolling on hiving off TCS into a separate company, reports Our Corporate Bureau.
The Tata group holding company has obtained shareholders' approval to hive off TCS into Orchid Print India, a 90 per cent subsidiary.
Orchid Print will subsequently be renamed TCS, or any other name containing the word Tata'. It has a paid-up share capital of Rs 36.44 crore (Rs 364 million). The transfer price will not be lower than the book-value.
Although no official decision has been taken, the group is aiming at taking TCS public with a domestic IPO and an overseas issue by the middle of 2003.
