Tata Digital has entered into a put-call option with the founders of 1MG under which Tatas can acquire the balance stake for ₹448 crore. Tata Digital owns nearly 63 per cent stake in 1MG.
As per Tata Sons annual report for FY22, the software-to-steel conglomerate informed that, in June 2021, Tata Digital has made an investment in 1MG, a digital health company for a 58.7 per cent stake. By the end of CY2021, it had acquired an additional stake over four per cent taking its total stake to 62.97 per cent.
It informed that it had acquired the company for a cash consideration of ₹720 crore. The remaining 37 per cent continue to be owned by the previous promoters who founded the company in 2015.
Tata Sons said further added that it has entered into a Put-Call option agreements with respect to the equity shares held by the management team and the Compulsorily Convertible Preference Shares (CCPS) held by other shareholders.
A Put-Call options agreement is treated as linked transaction along with acquisition of share by which the control is gained.
It further added that, “Tata Digital has written put options over the equity of 1MG which permits the holder or the management team of 1MG to put their shares in the subsidiary back to Tata Digital at their fair value on specified dates in case the IPO is not completed on or prior to the expiry of 5 years and 3 months from the acquisition date.”
IPO likely
What this basically means is that Tata Digital may float an IPO of 1 MG in the next five years. In case Tata Digital is unable to float an IPO, the management team that still holds over 37 per cent can offload their remaining stake before 2026, i.e. 5 years and 3 months for a cash consideration of ₹448. 75 crore.
According to its website, 1 MG has 260 million+ visitors, 31 million+ orders delivered and it is present in over 1,800+ cities.