Book value of investments in listed firms doubles to Rs 6,291 cr in FY07.
Tata Sons, the holding company for all Tata Group’s investments, has increased stakes in several group companies in an attempt to thwart any potential hostile takeovers.
For the year ended March 2007, Tata Sons has increased its stake in Indian Hotels to 68.5 million from 6.7 million a year ago. The corresponding figures for Tata Steel and VSNL are 139.7 million (110.8 million) and 24.2 million (10.3 million). Among unlisted companies, Tata Sons significantly increased its investments in Tata Sky.
However, its stakes in Tata Motors and Tata Power were more or less unchanged. An interesting note in the Director’s Report is the suggestion that Tata Sons is worried about a potential hostile takeover bid on some of its listed subsidiaries, where its stake is less than 50 per cent.
The book value of investments in the listed companies doubled from Rs 3,644 crore to Rs 6,291 crore in the same period.
Tata Sons reported a total income of over Rs 3,800 crore and net profit of Rs 3,300 crore, which translates into earnings per share of Rs 82,000 for the financial year 2006-07. To top it all, it reported reserves of Rs 12,000 crore. The other income of Rs 2,300 crore is mainly profit from the sale of shares, mainly in Tata Consultancy Services (TCS). Roughly, 20 million TCS shares were sold during the year.
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The market value of its investments is over Rs 1,00,000 crore, but with some of its biggest subsidiaries yet to be listed, there is great potential for value unlocking.
| FINANCIALS FY07 | |
| Total income | Rs 3,852 cr |
| Net profit | Rs 3,335 cr |
| EPS | Rs 82,322 |
| Reserves & surplus | Rs 12,123cr |
| Dividend income | Rs 1,300 cr |
| Profit on sale of shares | Rs 2,300 cr |
Almost the whole of the group’s billion-dollar income is from dividend declared by its listed subsidiaries and profit from sale of shares in these companies. Dividend from TCS is the single biggest contributor to Tata Sons’ income with Tata Motors and Tata Steel also chipping in with decent amounts.
Tata Sons has investments in over 100 companies, of which only a dozen-odd are listed. It has 82 subsidiaries, of which 80 are unlisted.
Some of the prominent ones are its DTH venture, Tata Sky, and its insurance JV with AIG, both of which are in the red now.
Unlike Bharti and Reliance Communications, which report quarterly profits in excess of Rs 1,500 crore, Tata’s telecom subsidiary, Tata Teleservices, is bleeding with losses close to Rs 1,000 crore for FY07. Its retail chain, Croma, which commenced operations in 2006-07, also reported a marginal loss of Rs 18 crore in its first year.
Not surprisingly, Tata Sons is also a major source of funds for its group companies. It stands guarantor for thousands of crores of loans given to its subsidiary companies.
So, while Tata Sons has cash reserves of around Rs 2,500 crore, it still has Rs 4,000 crore debt in its balance sheet.
As for the company management, apart from a couple of names that may not be so familiar, most of the 10 directors on the board of Tata Sons are trusted lieutenants of Chairman Ratan Tata.
The shareholding pattern of Tata Sons does not seem to have changed much over the last few years. Fifty one per cent stake in Tata Sons is held by two trusts, Sir Dorabji Tata and Sir Ratan Tata Trust.
| SHAREHOLDING PATTERN Total equity shares 4,04,146 (Rs 1,000 each) | |
| Shareholder | No of shares |
(Shapoorji Pallonji group)
(Shapoorji Pallonji group)
1,13,067
(Chhota Udaipur)
According to the group website, these trusts were created by the sons of the families of Jamsetji Tata, the founder of the Tata Group. Ratan Tata is believed to be a trustee in both trusts. Shapoorji Pallonji Group, one of the oldest construction companies in India, holds 18 per cent stake in Tata Sons. Ratan Tata holds just 3,368 shares in his personal capacity, which is less than 1 per cent.
While Tata Sons may be one of the most profitable unlisted companies, it also has one of the biggest balance sheets of any Indian company, especially if one were to consider the market value of its investments in group companies. No wonder then that many Tata group shareholders want Tata Sons too to be listed.
(This is a part of a series on unlisted companies. By arrangement with UTVi Business News)