Tata Sons, the holding company of all Tata companies, increased its stake in watch and jewellery maker Titan Industries by 4.37 per cent at 15.22 per cent.
Tata Sons bought 38.78 million shares of Titan from Kalimati Investment Company at Rs 250.10 a share, as part of restructuring of its investment portfolio, said Titan, in a filing to the BSE.
Kalimati Investment is a subsidiary of Tata Steel. The stake-sale has resulted in the steel major getting about Rs 970 crore. Post stake-sale, Kalimati’s stake in Titan Industries is set to come down to 4.37 per cent from 8.74 per cent.
Tata Sons has investments in over 100 group companies.
Asked about the rationale behind the move, analysts at Macquarie Securities, IDBI Capital and Sharekhan Securities said it has been a strategy of Tata Sons to increase stake in group companies at regular intervals, or when the share price falls substantially. They further added that it could be part of a larger restructuring process, whereby all the investments would be routed through the holding company for financial clarity.
A Macquarie analyst said the deal would enable Tata Steel to infuse funds in its new projects. The sharp fall in demand for steel has hit Tata Steel in the last few quarters.
The company has been making losses in its European subsidiary, besides dealing with pressure in commodity prices in India, the analyst said, adding that this has also impacted profits as well as revenues. The company has a net debt of $10.5 billion.
Sonam Udasi of IDBI Capital, said Tata Sons could be looking at investing in the long-term growth story of companies such as Titan, which is no more just a watch or jewellery maker.
It has diversified into several lifestyle products and is betting big on the Indian consumption story. “The increase in stake just proves the importance of Titan Industries within the group.
“Though the company’s growth has been slow in the last 3-4 quarters, due to a slowing economy and pressure on gold prices, we expect the company to bounce back to its original growth levels of 50 per cent in another one year,” Udasi said, adding that the company is expected to give good returns in the next 5-7 years.
On Thursday, while the shares of Titan Industries closed at Rs 256.50 up 1.91 per cent, Tata Steel’s closed at Rs 312, up 1.99 per cent on the BSE.