Tata Sons, holding company of the Tata group, is investing Rs 975 crore in Pune IT City Metro Rail, a special purpose vehicle that has won the contract to construct, operate, and maintain the project connecting Shivaji Nagar and Hinjewadi in the city.
The Tatas own a 74 per cent stake in the SPV; the rest is owned by Siemens Project Ventures.
The Rs 7,420-crore, 23-km project is being financed through debt-to-equity of 1.8 times and the entire debt has been tied up, and the envisaged equity commitment is supported by Tata Sons, said a banking source.
The Pune metro rail is being developed by the Maharashtra and Union governments, with a 50 per cent stake each.
Tata Realty and Infrastructure (TRIL), a subsidiary of Tata Sons, is making the aforementioned investment in the metro rail SPV. TRIL is planning to sell its recently commissioned roads and ropeway projects to raise funds and retire its own debt.
An email to Tata Sons did not elicit any response.
Bankers said Tata Sons is focusing on increasing the contribution of its digital, electronics and aviation businesses to the group’s profitability, and some of the entities like the Pune metro SPV may require funding from Tata Sons as growth capital because TRIL is focusing on retiring its debt.
Tata Sons is likely to raise additional debt for these projects, apart from investing its own cash, which is expected to flow in as dividend income in the ongoing financial year.
Tata Sons, which had standalone debt of Rs 30,000 crore as of March this year, is planning to raise funds via issuing non-convertible debentures.
Tata Sons is also looking at listing its satellite TV broadcasting arm, Tata Play, to raise around Rs 3,200 crore.
“Tata Sons also owns stakes in profit-making insurance companies and may look at raising funds by selling part of their stakes,” the banker said.
TRIL is expecting a boom in the infrastructure sector mainly due to the Indian government’s increased impetus on infrastructure development, especially under the Parvatmala initiative for ropeways.