Tata Communications Announces Hive Off of Digital Services Business to Subsidiary

On March 21, 2024, Tata Communications Ltd said that the company’s board had approved the proposal to hive off its digital services business to its wholly-owned subsidiary, Novamesh Ltd.

Details of the Hive-Off Proposal

Tata Communications Ltd stated in an exchange filing, “The Board of Directors of Tata Communications Limited, at its meeting held today, has approved the proposal to enter into a business transfer agreement (Agreement) for the hive-off of the company’s identified new edged digital services business (‘identified business undertaking’) to its wholly owned subsidiary, Novamesh Limited (Novamesh) as a going concern on ‘slump sale” basis.”

The company further added that the transfer of the identified business undertaking to Novamesh is subject to the satisfaction of conditions precedent as stipulated in the Agreement and receipt of such permissions and consents as may be required.

As per the exchange filing, the net worth and turnover, basis the carved-out balance sheet of the company, as of December 31, 2023, was ₹457.90 crore and ₹638.71 crore, respectively. However, the turnover and net worth as of March 31, 2023, from new edged digital services business has not been prepared at this stage.

The sale consideration is ₹458 crores upon completion in accordance with the terms of the agreement. The effective date of the slump sale is expected to be from April 1, 2024 and is anticipated to be closed by June 30, 2024.

Novamesh Ltd, being a wholly-owned subsidiary of Tata Communications, ensures continuity in operations and maintains the company’s consolidated financial status.

The company added that “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”.

Tata Communications Limited is involved in the business of offering telecommunications services. Novamesh Limited is a newly incorporated company authorised to offer information technology-enabled and related services. As of March 31, 2023, the net worth of Tata Communications Limited was ₹9,861.33 crore, and the turnover was ₹7,236.28 crore.

Stock Performance

On March 22, 2024, the share price of Tata Communications Limited opened at ₹1,930.00, touching the day’s high at ₹1,930.55, as of 9:45 AM on the NSE.

In the past year, Tata Communications’ stock has surged by an impressive 59.33%, with a YTD return of 8.5%. Over the last three years, the stock has delivered a return of over 60%, reflecting a stock price CAGR (Compounded Annual Growth Rate) of approximately 18%.

source: tijorifinance

(The TJI Communication Equipment index includes Tata Communications, Sterlite Technologies, ITI, GTL Infrastructure, HFCL, NELCO, Indus Towers, and Tejas Networks.)

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