Tata Sons looks to sell stakes in group firms to raise funds

The conglomerate is initially looking to raise at least ₹5,000 crore through potential stake sales in group companies starting with Tata Consumer Products Ltd, Tata Power and Tata Realty and Infrastructure, among others. “Tata group will raise the capital through fresh issuances through preferential allotments in various Tata group companies or part sale of promoter stakes in the next six months," one of the two people cited above said, seeking anonymity. “The group is also undertaking an internal evaluation to explore potential value unlocking opportunities in various group firms," the person said.

Both said the proposed fundraise will be used primarily for investments in the group’s ambitious TataNeu super-app venture, a unit of Tata Digital. In a regulatory filing last week, Tata Consumer Products said its board will meet on Tuesday to consider raising funds by issuing preferential shares equivalent to 1.5% of its paid-up equity capital to a foreign buyer.

Goldman Sachs and JP Morgan have been mandated by the conglomerate to scout for potential investors, the people said, adding that the fundraise is proposed to be carried out in multiple tranches.

A spokesperson for Tata Sons declined to comment.

A portion of the planned fundraise could be used to trim the Tata group’s debt and also support the working capital needs of the new ventures being planned by Tata Sons, including the aviation business (Air India), renewable energy business, the planned super-app business and other digital capabilities being built by the 155-year old conglomerate.

Tata is looking to strengthen its e-commerce businesses further, including TataNeu, which has already been given a soft-launch for Tata group employees, and is being planned to be launched officially for the wider public during the ongoing Indian Premier League.

Raising equity capital from investors will help bolster the TataNeu initiative and take on well-funded and entrenched rivals in the digital space, the people cited above said. TataNeu will be pitted against e-commerce firms Amazon, Walmart-Flipkart and Mukesh Ambani-promoted RIL’s digital properties business housed under Jio Platforms.

While a vast franchise of in-house products may offer the Tata group an edge over rivals in terms of pricing and margins, Tata Digital needs to significantly ramp up its logistics and back-end supply chain to effectively take on its competitors.

Tata Sons chairman N. Chandrasekaran, along with Pratik Pal, CEO of Tata Digital, and Mukesh Bansal, founder of Myntra and CureFit, are jointly spearheading Tata Sons’ e-commerce ambitions through TataNeu, which aims to consolidate multiple digital entities of Tata into a single digital marketplace and consolidate the estimated 410 million consumers under the group’s multiple digital businesses on a single platform—a plan somewhat similar to what Reliance has been doing with its flagship digital venture Jio Platforms over the past two years.

Tata’s super-app currently includes BigBasket, online pharma store 1mg, Croma and Tata CLiQ, and there are plans to add more products and services, including Air Asia flight tickets, hotel stays, car rentals, restaurant dishes, education, fund transfer and retail financial products as well, in the coming months.

In line with its e-commerce goals, Tata Digital has acquired several firms, including Grameen eStore, Urja, BigBasket, 1 mg, AccessBell and CureFit, while Croma, Westside and Star Bazaar follow both physical and digital sales channels.

Tata’s closest rival RIL has also made a series of acquisitions including Netmeds, Asteria, Tesseract, business directory platform JustDial, online furniture startup Urban Ladder, logistics startup Grab A Grub, edtech Embibe, lingerie brand Clovia and quick multi-purpose courier firm Dunzo.

RIL’s Jio Platforms has raised more than $27 billion from over a dozen global investors including Meta and Google to drive its digital plans.