Ratan Tata Endowment Foundation Makes First Investments in Tata Digital and Tata Technologies
The Ratan Tata Endowment Foundation, founded by former Tata Group chairman Ratan Tata in September 2022, has made its first investments in Tata Digital and Tata Technologies. The foundation purchased a 1% stake in Tata Digital and slightly less than 1% in Tata Technologies.
The foundation purchased Tata Technologies shares from Tata Motors for INR 147 crore. The investment was funded by a loan from Tata Capital. According to reports, the foundation aims to raise funds for philanthropy through dividends and the sale of shares.
Tata Digital is currently valued at $15 billion (INR 1.24 lakh crore), according to analysts, taking into account its super App, Tata Neu. A spokesperson for the trust said that the income generated through dividends is not adequate to meet the expenses given the robust philanthropic undertakings. The Tata Trusts” philanthropic plans span various sectors such as health, education, sanitation, and rural development and require immense funding to be on par with the works of global entities.
“The Ratan Tata Endowment Foundation is a Section 8 not-for-profit company, which has its own benefits over a charitable trust,” Sakate Khaitan, a senior partner at Khaitan Legal Associates, told The Economic Times. “It can focus on multiple charitable objectives while having the benefits of perpetuity (as well as the) higher governance thresholds that the Tata group prides itself on, and can hold investments directly in for-profit companies,” he said.
“Whether or not they choose to invest outside the Tata group will depend on its charter documents,” he said.
Setting up an endowment fund has several benefits, including wealth management and succession planning. One of the most significant advantages is that it can help secure tax efficiencies by registering the corpus and availing of exemptions under the Income Tax Act.
In simple terms, an endowment is an investment vehicle that holds an underlying investment fund, which is contributed by the donor for charitable purposes. An endowment trust”s main undertaking is investment activity, and it uses the yield to implement charitable objectives. A charitable trust, on the other hand, directly allocates its funds to charitable activities.
