Shares of Tata Communications were dropping on Thursday after the firm approved a proposal to hive off its digital services business to its wholly-owned subsidiary, Novamesh.
What Happened: The Board of Directors of Tata Communications approved the proposal to enter into a business transfer agreement for the hive-off of the company’s identified new edged digital services business to Novamesh as a going concern on a “slump sale” basis, according to a stock exchange filing.
The transaction, structured as a slump sale, is subject to various conditions precedents and regulatory approvals. The identified business undertaking, which contributed a turnover of ₹638.71 crore and has a net worth of ₹457.90 crore as of December 31, 2023, will be transferred to Novamesh as a going concern.
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The sale consideration is set at ₹458 crore, subject to final adjustments, and it is expected to be closed by June 30. The effective date of the slump sale is anticipated to be April 1.
Novamesh being a wholly-owned subsidiary of Tata Communications ensures continuity in operations and maintains the consolidated financial status of the company, it said.
The transaction, falling within the ambit of related party transactions, has been executed at arm’s length pricing principles and approved by the Audit Committee of Tata Communications.
While Tata Communications is primarily engaged in providing telecommunications services, Novamesh is newly incorporated and authorised to provide information technology-enabled and related services.
What Happened: Tata Communications’ share price was down 0.21% at ₹1,904.15 near the start of trade on Thursday.
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