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Sunday, June 16, 2024

Why TCS shares dropped 3% in early trading was explained

<p>In early trading on Tuesday, shares of Tata Consultancy Services (TCS) fell 3% after it was revealed that the parent company of the Tata Group, Tata Sons, had sold around 2.02 crore shares of the IT business in a block sale.</p>
<p><img decoding=”async” class=”alignnone wp-image-527436″ src=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-why-tcs-shares-dropped-3-in-early-trading-was-explained-tcs-shares-are-trading-hig.jpg” alt=”theindiaprint.com why tcs shares dropped 3 in early trading was explained tcs shares are trading hig” width=”1017″ height=”572″ title=”Why TCS shares dropped 3% in early trading was explained 9″ srcset=”https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-why-tcs-shares-dropped-3-in-early-trading-was-explained-tcs-shares-are-trading-hig.jpg 690w, https://www.theindiaprint.com/wp-content/uploads/2024/03/theindiaprint.com-why-tcs-shares-dropped-3-in-early-trading-was-explained-tcs-shares-are-trading-hig-390×220.jpg 390w” sizes=”(max-width: 1017px) 100vw, 1017px” /></p>
<p>TCS shares dropped 3% on the Bombay Stock Exchange (BSE) after this transaction, closing at Rs 4021.25. The average share price of Rs 4,043 is used to determine the deal’s approximate worth of Rs 9,000 crore.</p>
<p>The goal of the Tata Sons-initiated block sale was to sell up to 2.34 crore TCS shares at a floor price of Rs 4,001 a share, or 3.65% less than the closing price of the day before.</p>
<p>However, later in the evening, when the stock exchanges release the data, the buyer and seller’s final confirmation will be made public.</p>
<p>It should be mentioned that TCS, the biggest software services exporter in India and the second-most valuable listed firm with a market capitalization of 14.5 lakh crore, is primarily owned by Tata Sons, with a 72% interest.</p>
<p><strong>The rationale for the stake sale</strong><br />
There is conjecture that Tata Sons’ decision may have been influenced by the need to reduce debt and the investigation of investments in developing industries like semiconductors, even though an official statement outlining the reasoning for the share sale has not yet been made public.</p>
<p>Furthermore, with the Reserve Bank of India’s (RBI) regulatory limitations on non-banking financing businesses, the transaction may possibly be a calculated move to avoid the likelihood of Tata Sons’ IPO.</p>
<p>In response to allegations that the RBI had refused to provide Tata Sons with an exemption, which would have prompted similar requests from other corporate holding companies, Tata Sons has been consulting with legal and financial specialists on how to handle the matter.</p>
<p>Tata Sons wants to reduce its debt below the Rs 100 crore level in order to stay out of the RBI’s regulatory purview, since it has borrowings totaling more than Rs 20,000 crore. The Dorabji Tata Trust (28%) and the Ratan Tata Trust (24%) control the majority of the shares, however, the Tata Group also has a number of cross-holdings across its organizations.</p>
<p>The Tata Group is still the most valuable conglomerate in India even after selling a part; its market value is more than Rs 30 lakh crore. Just TCS accounts for 50% of this value.</p>

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