Tata to sell $1.25b stake in software development unit to pay debt

Signage for Tata Communications Ltd. is displayed atop of the company's headquarters in Mumbai, India. Photographer: Dhiraj Singh/Bloomberg

Tata Sons Ltd., India’s biggest business group, plans to sell $1.25 billion of its stake in Tata Consultancy Ltd., according to terms of the transaction.

Tata Sons will sell 28.27 million shares of Asia’s largest software developer, or about 1.48 percent stake, according to the terms. The company plans to sell the shares at between 2,872 rupees to 2,925 rupees a share, the terms show. Citigroup Inc. and Morgan Stanley are the bankers to the sale. Tata Consultancy, which is 73.5 percent owned by its parent, rose 0.6 percent to 3,052.15 rupees in Mumbai earlier on Monday.

Tata Sons will use the proceeds to pay creditors of its wireless division, according to a person with knowledge of the matter. The company will also use the funds to raise its stake in some of its unit in a bid to reduce cross holdings, the person said asking not to be identified as the matter is private. Tata sold Tata Teleservices Ltd.’s mobile-phone operations to Bharti Airtel Ltd. last year and pledged to pay the unit’s obligations.

The holding company is also seeking an offshore syndicated loan, as it seeks to pay down expensive debt at telecommunications unit, people familiar with the matter said last week. Tata Sons has mandated lenders for a $1.5 billion six-year loan. Tata Sons plans to use the proceeds to repay debt of units Tata Teleservices and Tata Teleservices Maharashtra, a person said then.