Tata Sons’ net debt at eight-year low as cash reserves touch Rs 9,516 crore in FY24: Report

Tata Sons Private Limited has seen a drop in its net debt  to Rs 5,656 crore in the first 10 months of the fiscal year with its cash reserves swelling to  Rs 9,516 crore in the same period. As per Capitaline data, Tata Sons’ net debt was Rs 5,132 crore in 2015-16. But between March 2017 and March 2023, Tata Sons’ net debt hovered above the Rs 14,700 mark. It was the highest, Rs 27,437 crore, at the end of March 2019, Business Standard reported. 

On the other hand, the Tata Group’s holding company gross debt almost halved to Rs 15,173 crore until January 2024 on a standalone basis. It peaked at Rs 31,363 crore in March 2019 (FY2020). 

The sudden increase in the cash reserve is a positive turnaround for the company, which is betting huge in newer segments, such as semiconductors, electric vehicle batteries, and the aviation business, the report said.

The sharp fall in net debt in 2023-24 clearly shows that the company may soon emerge as a net debt-free company. This is due to a sharp decrease in its cash infusion into the loss-making Tata Teleservices, while dividends and buybacks from its subsidiaries, such as Tata Consultancy Services, have risen substantially, sources told Business Standard. 

As per the report, a major part of Tata Sons’ cash in the past six years was used to inject money into Tata Teleservices, as the latter paid off its bank debt and other dues to the Indian government, totaling Rs 60,000 crore. “While several other telecom companies filed for bankruptcy following the adverse 2G Supreme Court order, Tata Sons repaid all bank dues in the past five years of Tata Teleservices,” the source said.

Last year, the Reserve Bank of India (RBI) classified Tata Sons as an upper-layer non-banking financial company (NBFC), making it mandatory for the company to list itself on the stock exchanges by September 2025.

On September 14, 2023, the RBI had notified 15 companies, including Tata Sons, under this category. The holding company would now have to list on the bourses by September 2025.

Earlier this week, a report stated that Tata Sons could fetch a valuation of Rs 7-8 lakh crore in an initial public offering (IPO), considering the current market capitalisation of group firms.

The market value of Tata Sons’ listed investments is estimated at Rs 16 lakh crore, a report published by investment banking firm Spark PWM stated. The group could derive another Rs 1-1.5 lakh crore of value from unlisted investments and step-down subsidiaries such as Tata Technologies, Tata Metalliks and Rallis.

Tata Trusts owns a 66 per cent stake in Tata Sons, while the Mistry family owns an 18.5 per cent stake in the company. An IPO by Tata Sons would provide an exit for the Mistry family, which is currently facing liquidity issues due to high debt. 

Tata Capital, a subsidiary of Tata Sons, has also been tagged by the RBI as an upper-layer NBFC and is required to be listed by September next year. A listing of Tata Capital would lead to cash generation for Tata Sons, which currently owns a 94 per cent stake in Tata Capital.

Four group companies – Tata Motors, Tata Chemicals, Tata Power and Indian Hotels Company (IHCL) – hold ownership in Tata Sons. The only realistic way for potential value unlocking of Tata Sons stake is through Tata Chemicals wherein the ownership is about 80% of the company’s market capitalisation. The stake is worth about 16-21% of the mcap for the other three companies, the report said.

An earlier report by Kotak Securities said Tata group was considering selling a 5% stake in Tata Sons through the IPO to raise about Rs 55,000 crore at an estimated valuation of Rs 11 trillion.