Tata Sons, the holding company of the Tata group, will infuse an additional Rs 2,420 crore in its loss-making unlisted subsidiary, Tata Teleservices, which will, in turn, use the cash to pay off its lenders before March.
According to a banking source, Tata Teleservices will have to pay Rs 1,530 crore to banks by February end and another tranche of Rs 890 crore by March 11. “We have been assured by Tata Teleservices management that Tata Sons would be infusing the cash into the company,” said a lender close to the development.
Tata Sons will raise the cash by participating in the Rs 18,000-crore buyback announced by Tata Consultancy Services (TCS). Tata Sons and its group company, Tata Investment Corporation, will raise around Rs 12,993 crore by selling their TCS shares at Rs 4,500 per share.
The banker said Tata Teleservices, which made a loss of Rs 1,400 crore in the first nine of the current financial year, has a negative net worth of Rs 19,182 crore, thus requiring a helping hand from its promoter to repay debt. The company’s revenues were Rs 1,250 crore for the nine months ended December 31.
Tata Teleservices has remained a cash drain for Tata Sons despite the group selling the cellular telephony business to Bharti Airtel. The group has already repaid Rs 60,000 crore of Tata Teleservices loans and dues to the Indian government.
Tata Teleservices and its listed subsidiary, Tata Teleservices (Maharashtra), were slapped with adjusted gross revenues (AGR) worth Rs 18,500 crore (including interest on the dues) as on March 31 last year after the Supreme Court ordered all telecom companies to pay their past dues to the government based on the AGR. Of this, the Tata companies have paid Rs 4,200 crore.
On October 29, TTSL and TTML informed the Department of Telecommunications about their decision to opt for deferment of AGR-related dues by four years. On January 11, as part of the relief package announced for the sector, Tata Tele conveyed its desire to convert the interest amount for the moratorium period into equity shares of TTSL and TTML.
However, after the DoT calculated that Tata telecom companies owe only Rs 200 crore interest as compared to the group’s calculation of Rs 800 crore, on February 1, TTSL and TTML informed the DoT about their decision to not pursue the equity conversion option.
According to CARE Ratings, TTSL’s capital structure was highly leveraged with gross bank debt for both the entities (TTSL and TTML) at Rs 10,800 crore as on March 31, 2021. Creatives Writing