Tata Sons, the Tata group's holding company, has set the price for its proposed buyback programme around Rs 7-8 lakh a share. The company is planning to buy back 10 per cent of its shares, though it has an enabling resolution to go up to 20 per cent.

The closely held Tata Sons has shot off letters to all its shareholders intimating them of the buyback plan, the timing of which is yet to be finalised. However, the buyback is expected to occur later in 2003.

A Tata Sons spokesperson declined to comment on the issue. But one of the recipients of the letter confirmed that the buyback price was more than the price at which the Tata Sons scrip was last traded among shareholders in December 2001, at Rs 720,000 a share.

At around Rs 800,000 a share, Tata Sons would be valued at around Rs 32,000 crore (Rs 320 billion). The buyback price need not, however, reflect the actual value of a company.

Sources familiar with the development told Business Standard that in his response to the Tata Sons letter, construction baron Pallonji Mistry, the single largest shareholder of Tata Sons, had confirmed his intention to participate in the buyback programme. Mistry holds 18 per cent of Tata Sons' equity.

However, the Tata trusts, which together hold almost a 65 per cent stake in Tata Sons, had decided not to sell back their shares, Tata sources said. Their plan is to hold on to the shares, which will result in their holdings going up after the buyback.

The Tata trusts and individual group companies will be given shares of Tata Consultancy Services, which is to be hived off in the coming months, resulting in a lucrative exit option later when TCS goes public.

That way, the trusts will continue to control Tata Sons, and will be rewarded by offloading TCS shares after it is listed. The capital structure of TCS is yet to be finalised though.

Several Tata group companies confirmed they would participate in the Tata Sons buyback, which is meant primarily to reward group companies for subscribing to the Tata Sons' controversial rights issue in 1996.

The listed group companies hold a 12.77 per cent stake in Tata Sons. Tata Engineering and Tata Steel (through Kalimati Investments) hold 12,375 shares each. Tata Chemicals holds another 10,237 shares, Tata Power 4,572 shares, Indian Hotels 4,500 shares and Tata Tea 1,755 shares.