Tata Sons Ltd has reportedly started exploratory talks with global investment banks to sell stakes in some of its financial units. The Tata Group holding company's financial services units include Tata Capital Ltd and Tata Asset Management Ltd.
Through these stake stales, the company will explore value-unlocking opportunities in its financial services units. Additionally, it will raise funds for investments in newer businesses such as online retail, Livemint reported.
It must be noted that Tata Group has not yet taken the final call on the quantum of divestment and how much it wants to raise from the proposed stake sales. According to the daily, the process may take time as it involves valuing its companies and analysing potential buyers.
Tata Sons is trying to strengthen its digital technology in order to reach out to consumers and build large consumer-facing businesses. The company recently sealed the deal valued at more than $1 billion to buy India's largest online grocer BigBasket. The Tata Group holding firm is planning to launch an 'Super App' that will host all the group's consumer businesses.
Tata Sons' move to sell stakes in some of its financial units is part of a wider industry phenomenon to monetise ownership in financial services businesses.
The company's latest corporate filing has shown that Tata Sons maintains strategic linkages and control over the financial services business through Tata Capital. Tata Sons has also regularly infused equity in Tata Capital. It infused Rs 4,950 crore in Tata Capital over FY16-FY20, of which Rs 1,000 crore was infused in FY20. However, the overall contribution of financial services firms towards Tata Sons' profitability has remained modest. On the asset management side, Tata Asset Management Ltd, the company that runs Tata Mutual Fund, had reported average assets under management of Rs 52,469.81 crore for the fourth quarter of FY20.