MUMBAI, July 15: Tata Sons Limited (TSL), the holding company of the Tata group, is making a 1:2 bonus issue of equity shares. The privately held company will issue up to 89,810.50 ordinary shares having a face value of Rs 1,000 each by capitalising up to Rs 8.98 crore from the share premium account.

The company is also stepping up dividend for the year ended March 1997 to Rs 1,500 a share (150 per cent) from Rs 1,000 a share (100 per cent) paid in the previous year.

These moves are being interpreted here in industry circles as TSL's and group chairman Ratan Tata's way of rewarding its new shareholders who had coughed up huge sums of money to subscribe to the company's rights issue in 1995-96.

TSL floated a rights issue of equity shares in 1995-96, its first in the last three to four decades, at a premium of Rs 99,000 a share. With the various Tata Trusts unable to subscribe to the issue, leading Tata group companies like Telco, Tata Electric, Tata Chemicals, Indian Hotels, Tata Industries and a Tisco subsidiary, Kalimati Investments, picked up these shares.

These companies, however, had to pay a higher subscription price of Rs 1.25 lakh a share from which the additional Rs 25,000 went to the coffers of the Trusts as compensation for renouncing their rights.

The completion of the rights issue took the holdings of these companies in TSL to 12.74 per cent while the holding of the Trusts fell to 65.88 per cent from around 79 per cent earlier.

Other subscribers to the issue included the Shapoorji Pallonji Mistry investment companies and board members of TSL who paid a price of Rs 1 lakh a share. The rights issue enabled TSL to garner over Rs 300 crore. The Pallonji Mistry companies now hold around 18.37 per cent while individuals hold around 3.01 per cent of TSL's equity.Some shareholders of the widely-held Tata group companies pilloried the group chairman and the boards of directors for the issue saying it was against their interests. They saw no point in their companies making substantial investments in the shares of an unlisted company.

The Tatas countered this saying that since it involved the holding company of the group, the shares renounced by the Trusts could not be offered to parties outside the group. In any case, TSL could not have continued to rely only on borrowings and internal generation to fund its long-term investments in group companies, they maintained.

With the proposed bonus issue, TSL's equity capital will rise from Rs 17.96 crore to Rs 26.94 crore. A major portion of the company's equity capital growth has come from bonus issues through the years. The share premium account showed a balance of Rs 296.13 crore as at March 31, 1997.

On the performance front, TSL has posted a 13.88 per cent rise in post-tax profit to Rs 141.85 crore for the year ended March 1997 compared to a profit of Rs 124.56 crore in the previous year. Total income grew faster at 34 per cent to Rs 842.14 crore from Rs 628.16 crore in the earlier year.

The book value of TSL's portfolio of investments in shares and debentures of companies as at March 31, 1997 was Rs 1,057 crore (including Rs 992 crore in quoted shares) compared to Rs 899.35 crore as at March 31, 1996. The market value of the investments, however, had declined to Rs 1,991 crore from Rs 2,229 crore over the same period.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.