Shares of Tata Consultancy Services (TCS) have fallen over 7 percent in 2 days from Tuesday's closing price of Rs 2,527 after several reports suggest that the market believes that the Tata Group may sell a portion of their stake in the IT company to buy Mistry family's stake as the group's second-largest minority stakeholder announced its exit.
With Tata Sons offering to buy Pallonji Mistry family's 18.4 percent stake in Tata Sons, the group may require Rs 1.78 lakh crore to meet Mistrys' valuation expectation. Talk on Dalal Street is that the options before Tata Group to raise funds to buy the stake is to raise debt by pledging Tata Group shares or selling part of TCS, the second most valued company in India and also Tata Group's cash cow.
Tata sons hold 72 percent stake in TCS.
While the group has not disclosed its plans to raise funds in the affidavit before the Supreme Court, speculations have triggered a fall in valuation. Shares of TCS have slipped over 5 percent on Thursday alone to an intraday low of Rs 2,337.20.
Tata Sons' stake in TCS alone accounts for 70 percent of its entire group valuation. Another 15 percent comes from the Tata brand value which has been upheld by the superior financial performance of its firms such as TCS, Titan, and Tata Consumer Products. These stocks, especially TCS has been an investor favourite for a long time.
Market experts say that if at this stage Tata Sons sells TCS shares to raise funds, free-float of the shares of the company will increase and may put a full stop on the stock rally. On the other hand, some analysts believe any decline in the stock should be seen as an opportunity to buy.