Tata Group's holding firm to invest ₹1,432 crore in engineering arm's rights issue

Tata Group's holding firm, Tata Sons, is prepared to invest ₹1,432 crore in the rights issue of its engineering and construction arm Tata Projects' rights issue, reported the news agency Business Standard on March 14.

According to the news agency's report, Tata Projects, a private limited company, aims to raise ₹2,500 crore from its existing shareholders, for which the firm's board of directors cleared the rights issue on Thursday, March 13. 

After its right issue move, Tata Projects will likely consider getting listed on the domestic stock markets, reported the news portal citing officials in the know.

Tata Sons will invest in Tata Projects from the dividend returns it is set to receive from its IT major arm, Tata Consultancy Services (TCS), in the first nine months of the financial year 2024-25, according to the report.

TCS announced a special dividend of RS 66 per share and an interim dividend of ₹10 for the October to December quarter. Tata Sons is set to receive ₹24,931 crore from the the dividend issue of TCS. 

About Tata Projects

Tata Projects specialises in engineering, procurement, and construction activities. The company was founded in 1979.

According to the news report, Tata Sons holds a nearly 57 per cent stake in Tata Projects, and the rest of the shareholding is with other Tata group companies, including Tata Power and Chemicals.

The news portal also cited a rating agency Crisil report, which stated that the engineering firm is expected to generate a cash flow of ₹300 to 400 crore in the financial year 2024-25. The cash balance as of June 30, 2024 was more than ₹600 crore. 

The research report also focused on boosting the moderate utilisation of fund-based bank limits, which averaged 64 per cent over a one-year period to June 2024. This leaves nearly ₹1,000 crore of unutilised credit, reported the news portal.

According to the news portal Moneycontrol's report, the company is building a semiconductor assembly and testing plant for a US-based chipmaking firm Micron Technology at Sanand near the city of Ahmedabad.

The news portal also cited a person aware of the development that the plant, once finished, will become the largest back-end semiconductor unit.