Tata Sons, the $410 billion holding entity of the Tata Group, has strategically chosen to remain an unlisted company by voluntarily surrendering its Non-Banking Financial Company (NBFC) registration to the Reserve Bank of India (RBI) after successfully repaying over Rs 20,000 crore in debt. According to a report published by The Economic Times, this decision permits Tata Sons to avoid the shareholder listing requirements mandated by the RBI, which would have applied had the company maintained its indebted status.
The recent repayment of Rs 20,300 crore has significantly decreased Tata Sons’ liabilities, with only non-convertible debentures and preference shares totaling Rs 363 crore remaining. To address these obligations, Tata Sons has made provisions of Rs 405 crore in deposits with the State Bank of India (SBI) and submitted an undertaking to the RBI in conjunction with the surrender of its registration certificate.
Initially classified as an NBFC – Upper Layer (NBFC-UL) in September 2022, Tata Sons was subject to obligatory stock exchange listing within a three-year window due to its designation. However, the substantial repayment of its debts has markedly improved the risk profile of the company, thereby nullifying the need for listing and allowing the relinquishment of its NBFC status.
In terms of financial performance, Tata Sons reported a remarkable 57 percent increase in net profits for the fiscal year ending March 2024, achieving a total of Rs 34,654 crore. Revenue rose by 25 percent, reaching Rs 43,893 crore, up from Rs 35,058 crore in the previous fiscal year. As of March 31, 2024, the company’s financial situation improved from a net debt of Rs 20,642 crore to a net cash position of Rs 2,670 crore, following a substantial 25 percent debt reduction compared to the prior fiscal year.
Furthermore, Tata Sons declared its highest dividend to date, amounting to Rs 35,000 per share for its shareholders. Major beneficiaries include the Dorabji Tata Trust, which holds 28 percent of Tata Sons, and the Ratan Tata Trust, with a 24 percent stake. Other notable stakeholders comprise Sterling Investment, Cyrus Investments, Tata Motors, Tata Chemicals, and Tata Power. This exceptional dividend payout was supplemented by nearly Rs 24,000 crore received from dividends dispensed by thirteen of its listed companies, prominently featuring Tata Consultancy Services (TCS), which contributed approximately Rs 19,000 crore.
A significant contributor to Tata Sons’ debt reduction strategy was the divestiture of shares in TCS. In March 2024, Tata Sons sold 23.4 million shares of TCS, generating approximately Rs 9,300 crore. This followed a prior sale in December 2023 during which the company procured over Rs 12,000 crore by participating in a TCS buyback scheme. Subsequently, Tata Sons’ ownership in TCS decreased slightly from 72.38 percent in December 2023 to 71.74 percent in March 2024.
In addition to its debt reduction achievements, Tata Sons registered a notable decline in total expenses, decreasing by 27 percent to Rs 2,776 crore, compared to Rs 3,794.70 crore in the previous fiscal year. The company also maintained a solid return on equity before exceptional items and taxes, which stood at 38.15 percent for FY24, just marginally lower than the preceding year’s performance.
As of March 31, 2024, Tata Sons’ total investments were valued at Rs 1,44,711 crore, reflecting an increase from Rs 1,30,286 crore from the year prior. The market capitalization of its listed investments experienced a substantial appreciation of 35.7 percent in FY24, increasing from Rs 11.21 trillion to Rs 15.21 trillion.
Overall, Tata Sons’ financial maneuvers, including significant debt reduction and robust performance metrics, underscore its strategic direction and commitment to maintaining its status as a closely held company while navigating the complexities of the financial landscape effectively.
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