Tata Sons, the parent company of the Tata Group, is set to increase its stake in Tata Autocomp Systems (TACO) by acquiring an additional 12.65 percent share for Rs 2,122 crore from Tata Capital. This acquisition will elevate the total equity valuation of TACO to approximately Rs 16,800 crore, as disclosed in recent filings from Tata Capital.
At present, Tata Sons owns a 40 percent stake in Tata Autocomp Systems, while Tata Motors holds a 26 percent share. The remaining ownership is distributed among various other Tata entities. Efforts to seek comment from Tata Group via email on Friday were unsuccessful.
The completion of this transaction is anticipated before the close of the current financial year. Tata Capital’s filings indicated that the company has entered into various agreements with Tata Sons to bolster business growth, sustain a robust capital adequacy ratio, and facilitate smooth operations.
These arrangements may encompass the sale of investments, contributions to brand equity and business promotion, provision of services, and other business-related transactions, including the lending and borrowing of funds. According to Tata Capital, the company has maintained an equity investment in Tata Autocomp Systems and has periodically divested portions of this investment to Tata Sons in different phases. As of April 1, 2024, Tata Capital held a 12.65 percent equity stake in TACO.
In June, Tata Capital sold 5.08 percent of its stake to Tata Sons for Rs 850 crore, and it now intends to transfer the remaining 7.57 percent stake for Rs 1,272 crore. The company also noted that an independent valuation of TACO had been conducted, and the transaction was reviewed and approved by its audit committee. It is worth mentioning that Tata Sons currently controls 93 percent of Tata Capital.
The total value of the investment sale and other dealings with Tata Sons during FY25 is projected to reach up to Rs 2,500 crore, representing approximately 13.76 percent of Tata Capital’s consolidated revenue for FY24. Consequently, Tata Capital sought the approval of its shareholders for these related party transactions.
Tata Capital has assured that the management provided all necessary details to the audit committee, as mandated by law, regarding these related party transactions. Following a thorough examination, the audit committee sanctioned the engagement in material related party transactions with Tata Sons for an aggregate value of up to Rs 2,500 crore during FY25, emphasizing that such transactions would be executed on an arm’s length basis and in line with the standard operations of Tata Capital.
Banking sources have suggested that Tata Capital is preparing for a potential initial public offering (IPO) following the Reserve Bank of India’s (RBI) classification of the company as an NBFC-Upper Layer, a designation that mandates it to be listed by September next year. Furthermore, Tata Capital is actively working on merging Tata Motors’ auto finance divisions into its operations.
According to a prior circular from the RBI, all entities classified as NBFC-Upper Layer are required to list themselves by September 2025. Initially, this would have necessitated Tata Sons to pursue a listing. However, during FY24, Tata Sons settled its entire debt of Rs 21,813 crore and applied to the RBI for declassification from the NBFC-Upper Layer category, thereby eliminating the need for any listing.
TACO is strategically significant for the Tata Group, serving as the holding company for its ventures in the auto components industry. Established primarily to promote captive consumption and foster a supportive ecosystem, TACO has more recently focused on capitalizing on the electric vehicle market, according to an analysis from Crisil.
In its annual report for FY24, Tata Sons reported a notable 25 percent increase in total revenue, reaching Rs 43,893 crore, alongside a profit before exceptional items and taxes of Rs 41,116.51 crore. The company also recorded a profit after tax of Rs 34,653.98 crore, marking a remarkable 57 percent growth compared to the previous year.
Tata Sons is the holding company of the Tata Group, a global conglomerate based in India. Established in 1868, Tata Sons operates across diverse sectors, including automotive, IT, steel, and hospitality. The company drives strategic investments and growth for its subsidiaries, fostering innovation and sustainability. Tata Sons is renowned for its commitment to ethical business practices and community development.
