Tata Sons Considers Increasing Stake in Tata Autocomp Systems
New Delhi: Tata Sons, the holding company of Tata Group, is exploring the possibility of acquiring an additional 12.65 per cent stake in Tata Autocomp Systems (TACO). This acquisition is estimated to cost approximately Rs 2,122 crore, as detailed in filings from Tata Capital. Should the acquisition proceed, it would elevate TACO’s total equity valuation to Rs 16,800 crore.
Currently, Tata Sons holds a 40 per cent stake in Tata Autocomp Systems, while Tata Motors possesses a 26 per cent share. The remaining portion is owned by other Tata companies. Despite inquiries regarding this potential deal, Tata Group has not commented, although reports indicate that the transaction is anticipated to close before the end of the current financial year.
In its filings, Tata Capital mentioned that to foster business growth, uphold a robust capital adequacy ratio, and facilitate smooth operations, the firm has engaged in various transactions with Tata Sons. These may include selling investments, contributing to brand equity and business promotion, providing services, and other business transactions such as lending and borrowing funds.
Tata Capital holds an equity investment in Tata Autocomp Systems and has periodically decreased this investment by selling portions to Tata Sons over time. As of April 1, 2024, Tata Capital reports holding a 12.65 per cent equity share in TACO. In June, Tata Capital sold a 5.08 per cent stake to Tata Sons for Rs 850 crore, and is now proposing to sell the remaining 7.57 per cent stake to Tata Sons for Rs 1,272 crore.
An independent valuation of TACO was performed, and this transaction has been referred to its audit committee. Notably, Tata Sons currently owns 93 per cent of Tata Capital.
Tata Capital projects that the total value of investment sales and other transactions with Tata Sons during FY25 could reach up to Rs 2,500 crore, which equates to approximately 13.76 per cent of Tata Capital’s consolidated turnover for FY24. As a result, Tata Capital sought shareholder approval for related party transactions.
The management has provided the audit committee with all pertinent details required by law for these transactions. Following a thorough review, the audit committee approved entering into these material related party transactions with Tata Sons, totaling up to Rs 2,500 crore for FY25. The committee emphasized that these transactions would be executed on an arm’s length basis in the ordinary course of Tata Capital’s business.
Additionally, banks note that Tata Capital is gearing up for a potential listing, following the Reserve Bank of India (RBI) designating it as an NBFC-Upper Layer, which mandates a listing by September next year. Tata Capital is also in discussions regarding merging Tata Motors’ auto finance arms with its operations.
