Tata to sell $1.25B stake in software arm to pay debt

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(Bloomberg) -- Tata Sons Ltd., the holding company for India’s biggest business group, is selling about $1.25 billion of its stake in software services provider Tata Consultancy Ltd.

Tata Sons was offering 28.27 million shares of Asia’s largest software developer, or about a 1.48 percent stake, after the market close Monday, according to terms for the deal obtained by Bloomberg. The company was planning to sell the shares at 2,872 rupees to 2,925 rupees a share, the terms show.

Shares of Tata Consultancy fell as much as 5.9 percent in Tuesday trading. They were down 4.7 percent, headed for the biggest one-day decline in more than a year, at 10:28 a.m. in Mumbai.

Tata Sons will use the proceeds to pay creditors of its wireless division, according to a person with knowledge of the matter. Tata sold Tata Teleservices Ltd.’s mobile-phone operations to Bharti Airtel Ltd. last year and pledged to pay the unit’s obligations.

It will also use the funds to raise its holdings in some listed units, the person said, asking not to be identified because the information is private. Tata Sons may buy the stakes from other Tata Group affiliates, which would help to reduce cross-shareholdings, according to the person.

The conglomerate has been planning to raise its ownership over time in five of its largest businesses including Tata Chemicals Ltd. and Tata Steel Ltd., Bloomberg News reported last year. Tata Sons is buying an additional 6.6 percent stake in Indian Hotels Co. that was held by Tata Trusts, according to a stock exchange filing this month. Last year, it boosted its stake in Tata Motors Ltd., the owner of Jaguar Land Rover.

Citigroup Inc. and Morgan Stanley are arranging the offering of Tata Consultancy stock, according to Monday’s terms. The price range represents a 4.2 percent to 5.9 percent discount to its last close.

The holding company is also seeking a $1.5 billion offshore syndicated loan, as it seeks to pay down expensive debt at its telecommunications unit, people familiar with the matter said last week. Tata Sons plans to use the proceeds to repay debt of units Tata Teleservices and Tata Teleservices Maharashtra, one of the people said at the time.

--With assistance from Anto Antony

Bloomberg News