Tata Group Chairman N Chandrasekaran is currently evaluating the option of winding down mobile services business, Tata Teleservices, following failed attempts to sell the beleaguered unit. If the operations are suspended as expected, the conglomerate will take a hurtful hit on its balance sheet as Tata Tele holds a consolidated debt of over £3.40 billion.
Tata Tele has around 45 million subscribers with about 4 per cent share of the Indian mobile telephony market. However, disposing of its telecom spectrum could lessen its total debt. A company spokesperson said, “As far as Tata Teleservices is concerned, the group is examining all options at this point in time.” The telecom services provider has been searching for a new home after Japanese partner DoCoMo which owns 26 per cent of its stakes, decided to pull the plug three years ago.
Tata was engaged in advanced discussions for a potential sale with Vodafone under former Tata Sons Chairman Cyrus Mistry. It, however, fell through over valuation differences. Tata Tele's closing down will now happen only after lenders agree to a loan recast programme. The company has approached lenders' consortium led by SBI for the same issue. Other group companies like Tata Power, Tata Communications, Tata Steel, Tata Industries and Tata Capital Financial Services also saw a drop in value in their investment in the financially unstable Tata Tele.
Tata Sons may shed its 'public ltd' tag
Meanwhile, Tata Sons, has initiated a proposal to turn itself into a `private limited company' from a `deemed public company,' which would intensify the battle between the holding company and its former chairman Cyrus Mistry. The most significant implication of this step will be that it places restrictions on Tata Sons' shareholders from selling their stake to external investors. The Mistry family , which holds an 18.4% stake in Tata Sons, has objected to the proposal and may move court. Tata Sons has called a shareholders' meeting, seeking approval to amend its Articles of Association to become a private limited company and alter its Memorandum of Association to change its name from Tata Sons Ltd to Tata Sons Pvt Ltd.
The change in Tata Sons' legal structure requires 75% of the company's shareholders to approve these special resolutions. The proposals will also have to be cleared by the National Company Law Tribunal. The Mistrys intend to vote against the resolutions. In a statement, Tata Sons said that the reinstatement of Tata Sons as a private company was considered by the board to be in the best interests of the company. The Mistrys have termed the Tata Sons move as “yet another act of oppression of the minority shareholders of the company at the hands of the majority shareholders.”
