Tata Sons posts flat growth under Chandrasekaran's first year in office

Tata Sons, the holding company of the Tata group, has reported flat financial performance under Chairman N Chandrasekaran’s first year in office. According to sources, its net profit was up 4.3 per cent to Rs 8.73 billion in the financial year ending March 2018, on the back of 6 per cent rise in revenues at Rs 81.56 billion in the same period. 

The company plans to raise an additional Rs 100 billion in fiscal 2019 by participating in the buyback of shares of Tata Consultancy Services (TCS) apart from raising more debt from banks and tapping international markets, according to a source close to the development.

“Fiscal 2018 was a difficult year for Tata Sons. It not only helped its telecom arm to repay bank debt and pay Docomo to buyback shares in Tata Teleservices but also raised stake in key listed companies. But thanks to TCS, it managed to raise substantial funds,” he said.

According to bankers, in the coming months, the firm plans to invest in key group companies, including in infrastructure, defence, aerospace /airlines, and retail and would raise debt from banks and international markets to fund these projects. As on July 31, Tata Sons’ standalone cash and cash equivalents were about Rs 55.87 billion, which would be used to fund its ambitious growth plans, bankers said. During the year, Tata Sons also made provisions of Rs 119 billion for losses in Tata Teleservices.

Chandra, who took over in February 2017 as chairman, has charted an ambitious plan to bring Tata Sons back on tracks. The company’s infrastructure arm has won crucial section of Navi Mumbai to Sewri trans-harbour sealink project, along with Larsen & Toubro, and would require funding for the project.

Earlier this year, Tata Sons sold TCS shares valued at almost Rs 90 billion (1.63 per cent stake). Besides, during 2017-18, the holding company received Rs 102.78 billion from buyback of shares announced by TCS. As a promoter of TCS with about 72 per cent stake, the holding company has huge financial flexibility to raise funds through debt. 

Tata Sons also repaid Rs 170 billion of Tata Teleservices’ loans in fiscal 2018 to a consortium of bankers in January. Tata Teleservices still has to repay the remaining Rs 60 billion before concluding the deal with Bharti. The next couple of years are crucial for the holding company as it plans to raise $1.5 billion overseas loan for the first time since 2007. 

During fiscal year ended March 2018, the group took several key decisions, including the transfer of its bleeding wireless telephony business to Bharti Airtel for free and merger of Tata Steel’s European business with Germany’s ThyssenKrupp.