Windfall for major listed group companies if Tata Sons goes public

Windfall for major listed group companies if Tata Sons goes public

The Tata group’s major listed companies, seven in number, stand to make big gains if Tata Sons, the holding company of the conglomerate, goes for an initial public offering (IPO).

 

That will unlock the value of their investment in Tata Sons, done years ago at low valuations compared to Tata Sons’ likely valuation now.

 

The seven listed group companies together hold around 12.1 per cent in Tata Sons.

 

The listed companies’ stake in Tata Sons is their large unrealised gains, which will get a ‘proper’ market valuation if Tata Sons lists.

 

The listed group companies, such as Tata Motors, Tata Steel, Tata Chemicals, and Tata Power, are the third-largest block of shareholders in Tata Sons. They come after Tata Trusts and the Shapoorji Pallonji group. 

Besides, Trent owns cumulative redeemable preference shares with a par value of ₹1,000 each — with their worth being ₹15 crore — in Tata Sons at the end of March this year.

 

Seven Tata Trusts — classified together as promoters — hold 65.3 per cent in Tata Sons.

 

Sir Dorabji Tata Trust and Sir Ratan Tata Trust are two biggest shareholders in Tata Sons with 27.98 per cent and 23.56 per cent, respectively.

 

The Shapoorji Pallonji group, on the other hand, owns 18.4 per cent through its two investment firms — Sterling Investment Corporation Pvt Ltd and Cyrus Investments Pvt Ltd. Each owns 9.2 per cent.

 

Other shareholders, including individuals, together own 4.2 per cent stake in Tata Sons.

 

There is power struggle going in Tata Sons and Tata Trusts with a section of the shareholders led by the Shapoorji Pallonji family pushing for the listing of Tata Sons.

 

Interestingly, Tata Sons is one of the few large holding companies not listed on the bourses.

 

The holding companies in other large business groups — such as Bajaj Holdings, Pilani Investments, JSW Holdings, TVS Holdings, Kalyani Investments, Tube Investments, and Bengal & Assam Company — are listed.

 

Among individual companies, Tata Steel and Tata Motors are the two biggest shareholders with 3.06 per cent each. Then come Tata Chemicals (2.53 per cent), Tata Power (1.65 per cent), Indian Hotels (1.11 per cent), Tata Consumer (0.43 per cent), and Tata Investment Corporation (0.25 per cent).

 

Tata Sons’ every ordinary share, with a face value of ₹1,000 now, has a book value of around ₹6.28 million on a consolidated basis. This translates into a book value of around ₹2.54 trillion at the end of March this year on a consolidated basis.

 

The combined stake of the Tata group’s listed companies in Tata Sons had a combined book value of ₹30,705 crore at the end of March this year. The market value is likely to be even higher as large holding companies trade at multiples of their book value.

 

Bajaj Holdings, the largest holding company in the country after Tata Sons in terms of assets, is trading at 2.1 times its latest book value.

 

Bajaj Holdings is a major shareholder in most of the Rahul Bajaj group companies, including Bajaj Auto and Bajaj Finserv.

 

In comparison, the investment cost of these companies’ stake in Tata Sons is only ₹449.13 crore, according to their annual reports.

 

However, it is a question if these listed group companies will sell or book profits on their investment in Tata Sons.