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Tata Sons looks to raise funds

Hefty Docomo deposit, lower FY16 income erode reserves

Dev Chatterjee  |  Mumbai 

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Tata Sons, the holding company of the Tata group, is approaching banks and financial institutions to raise funds as a hefty deposit in the Delhi High Court for the Docomo dispute and a 67 per cent fall in profits in the financial year 2015-16 (FY16) have left it with just Rs 1,400 crore cash reserves. The company had deposited Rs 8,450 crore with the registrar of the Delhi High Court on July 29 from its cash reserves of Rs 9,880 crore, leaving it with lesser funds for new projects such as aviation and defence. A banker said the company plans to raise Rs 1,200 crore in rest of FY17 and has started marketing its bonds to banks and institutions to raise Rs 750 crore. When contacted, a Tata Sons spokesperson said: “We do not share information on such matters. Suffice it to say that, from time to time, Tata Sons raises funds as part of its on-going activities.” The firm’s fund-raising plans come in the backdrop of falling profits in FY16, which at Rs 3,010 crore was down 67 per cent compared to a record profit of Rs 9,060 crore reported in FY15. Tata Sons reported revenues of Rs 8,100 crore, down 40 per cent as compared to Rs 13,210 crore reported in FY15. In the previous year, a large portion of its income had accrued because of generous dividend received from software exporter TCS, where it owns a 73.3 per cent stake. In 2016, Tata Sons received Rs 6,282 crore as dividend from TCS in FY16 compared to Rs 11,342 crore in FY15.

Analysts said with the appreciation of market value of Tata Sons’ equity investments between March and September 1, the company is in a comfortable position to raise funds from the markets. As on Wednesday, Tata Sons equity investment in TCS alone is worth Rs 3.65 lakh crore. With 50 per cent of the appreciation in market value of these investments allowed to be added to the net worth for the calculation of capital adequacy according to Reserve Bank of India norms, the borrowing limit becomes inconsequential for Tata Sons, said an analyst. The previous financial year, too, was bad for Tata group companies. In FY16, the Tata group’s revenue fell to $103 billion from about $108 billion reported in the previous financial year, mainly because of global political uncertainty, reduction in commodity prices and volatility in currencies. Of this, international revenues at around $70 billion constituted 69 per cent of the group’s revenues. FY16 also saw $9 billion of capital investment by group companies. The group’s capital investment exceeded $28 billion in the past three years — making it one of the largest investments by an Indian group along with Reliance Industries.

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First Published: Fri, September 02 2016. 00:48 IST
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