Tata Sons Hunting For PE Suitors For Minority Stake In Tata Digital: Report

Tata Sons is reportedly gearing up to formally initiate the process of selling a minority stake in Tata Digital, the entity behind the Tata Neu super app.

What Happened: The potential objective is to raise approximately ₹100 crore from global private equity funds, Moneycontrol reported, citing individuals familiar with the ongoing discussions.

Presently, discussions are at an informal stage with a few bulge-bracket private equity funds, they added. The formal process is anticipated to commence shortly. Once the valuation exercise is complete, and a tentative list of investors is finalized, a proposal will be presented before the board, one source mentioned.

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Established in 2019 as a subsidiary of Tata Sons, TDPL’s primary focus is to develop a consolidated e-commerce platform under the Tata Neu brand. This platform integrates various businesses from Tata companies to cater to consumer needs on a unified platform. If things stay on track, a deal can be expected before March this year, an insider said.

Why It Matters: In addition to the Tata Neu digital platform, TDPL incorporates consumer brands like Croma, loyalty programs of various brands, and digital payment services such as Big Basket, Croma, IHCL, Starbucks, Westside, Vistara and Tata Cliq.

The company holds controlling stakes in e-grocer Big Basket, e-pharmacy 1 MG, and fitness chain Curefit. Funding for these acquisitions involved a combination of external borrowing and internal accruals, amounting to close to ₹12,000 crore, according to corporate filings.

For the fiscal year ending March 2022, Tata Digital reported a total operating income of ₹16.34 crore and a loss of ₹1,122.88 crore. Despite initial challenges, the revamped ‘Tata Neu’ app has been gaining traction. The focus of investor interest could lie in loyalty programs across Tata group businesses, particularly in Vistara’s and Croma’s highly sticky business with substantial customer retention and return rates.

The purpose behind fundraising is reportedly two-fold: retiring a portion of the company’s debt and injecting equity into growth-stage businesses requiring financial infusion.

If successful, this would mark the third instance in recent years where a Tata group company onboarded a private equity investor. In 2021, Tata Motors raised ₹1 billion from TPG Rise in its EV arm and sold a 9.9% stake in Tata Technologies to the private equity fund in October.

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