Tata Sons will have to infuse additional equity capital in at least five subsidiaries in the current financial year, to help them meet their financial commitments as Corona virus pandemic has upset their budget planning for the current fiscal.
The firms are: Tata Realty & Infrastructure, Tata SIA Airlines, Air Asia India, Tata Teleservices, and Tata Capital.
The investment will be in addition to Rs 2,375 crore invested in Tata Realty in fiscal 2020, Rs 3,500 crore in Tata Capital and a massive Rs 50,000 crore in Tata Teleservices since January 2014. Both the airlines have been getting additional capital each year from the holding company since inception.
Tata Sons will have to step in as TRIL has around Rs 1,320 crore of repayments due on its NCDs (non-convertible debentures) over fiscals 2021 and 2022. “The company is likely to face refinancing risk with the large bullet repayments. However, TRIL has been able to successfully refinance its obligations in the past. With the help of Tata Sons, we do not see any problem,” said a banker close to the development.
The group will have to step in to put additional funds into its two airlines which are grounded since March 24. While Tata SIA Airlines has an order pipeline of 50 narrow body and six wide body aircraft, the carrier would require funding support from the joint venture partners–Singapore Airlines and Tata Sons.
“As both airlines are generating huge losses at present and will now need more time to turn profitable, the partners will have to extend additional funding support for meeting working capital requirements and maintaining a liquidity buffer till operations stabilise,” said he. In the financial year ending March 2019, Tata SIA made a loss of Rs 800 crore while Air Asia India Ltd, which has 30 aircraft in its fleet, had made a loss of Rs 671 crore in the fiscal 2019.
Tata Capital Financial Services is also raising additional debt in the current fiscal with its board clearing raising debt worth Rs 15,000 crore. In the earlier financial year, TCFSL’s capitalisation was supported by regular capital infusions by Tata Sons including Rs. 785 crore in fiscal 2017 and another Rs 575 crore trammche in FY 2018 in the form of compulsorily convertible cumulative preference shares (CCCPS)). The parent infused an additional Rs. 1,025 crore in the form of CCCPS in FY 2019. "The fund infusion in financial services will be higher in the current fiscal," saod a banker.
Interestingly, Tata Sons will also have to invest additional funds into Tata Teleservices so that the company can pay its adjusted gross revenues (AGR) dues to the Indian government as ordered by the Supreme Court in October last years. Tata Sons has infused about Rs. 46,595 crore from January 1, 2014 to December 31, 2019 into the business to fund the losses, debt repayments as well as for capital expenditure. The total AGR dues faced by Tata Teleservices Ltd is Rs 13,823 crore and with this, Tata Sons will end up paying Rs 74,000 crore for its telecom foray.
The Helping Hand
Tata Tele: Will need funds to pay AGR dues
Tata Capital: To remain well-capitalised
Tata SIA, Air Asia: To pay for aircraft acquisition,
TRIL: To repay NCDs and new projects