Tata Group plans to raise stakes in key listed units

Bloomberg

India’s Tata Group, seeking to cement control over a sprawling $100 billion business empire, is exploring ways to boost its stakes in key listed companies including the maker of Jaguar luxury cars, people with knowledge of the matter said.
Tata Sons Ltd., the group holding company, plans to raise its ownership over time in five of its largest businesses including Tata Motors Ltd. and Tata Steel Ltd., according to the people, who asked not to be identified because the information is private. A key priority for incoming Tata Sons Chairman Natarajan Chandrasekaran, who takes charge next month, will be to prepare a plan to protect group companies from potential takeover threats, the people said.
Chandrasekaran, 53, has been tasked with ensuring the group has sufficient power over major listed companies using the Tata brand, according to the people. India’s largest conglomerate aims to gradually increase its holdings in Indian Hotels Co., which runs the Pierre in New York, as well as Tata Chemicals Ltd. and Tata Power Co., the people said. While it owns 73 percent of Tata Consultancy Services Ltd., the group’s stakes in the other key companies range from 31 to 39 percent, data compiled by Bloomberg show.
Tata Sons had to call extraordinary general meetings to remove Cyrus Mistry from the boards of its operating companies after he was ousted as group chairman in an October boardroom coup. The conglomerate hired several investment banks to lobby for investor support ahead of the votes, which required more than 50 percent of shareholders to approve Mistry’s removal, people with knowledge of the matter said in December.
Plans are at an early stage, and no final decisions have been made, according to the people. The Indian conglomerate hasn’t worked out details including how to finance the share purchases, the people said. Tata Sons declined to comment in an e-mailed statement.
Tata Sons has the ability to increase its holdings in some group companies by leveraging the future earnings of “cash cow” Tata Consultancy, said Prabal Basu Roy, chief executive officer of Diptish Investments & Fund Advisors Inc. The highly leveraged position of some group entities means finding all the necessary funds won’t be an easy task, he said.
Shares of Indian Hotels gained as much as 2.6 percent Tuesday in Mumbai and were up 0.2 percent at 2:38 p.m. Tata Chemicals climbed 0.4 percent, while Tata Power and Tata Motors were little changed. Tata Steel declined 1.1 percent.
Chandrasekaran, who has headed Tata Consultancy since 2009, will take over as chairman of Tata Sons from Feb. 21. Under his leadership, profits of Asia’s biggest software exporter have quadrupled and its shares have tripled, making the business India’s largest company by market value.