Tata Sons stake in listed group companies crosses Rs 10 trillion

Value of its holdings in 14 firms is worth Rs 10.45 trillion, up 86% since March 2020

Tata Sons, the holding company of Tata Group, continues to make gains from the rally in key firms in the conglomerate.

The market value of Tata Sons’ direct stake in group listed companies crossed Rs 10 trillion for the first time last week.

On Friday, Tata Sons’ direct stake in 14 listed group companies had a market value of Rs 10.45 trillion, up 86 per cent from Rs 5.62 trillion at the end of March 2020.

While the group crown jewel, Tata Consultancy Services (TCS), continues to dominate Tata Sons’ portfolio, the market value of non-TCS investment crossed Rs 2 trillion for the first time, thanks to a rally in Tata Steel, Tata Motors, Tata Consumer, Tata Communications, and Tata Power, among others. (See the adjoining chart.)

These 14 listed Tata Group companies had a combined market capitalisation of Rs 17.9 trillion on Friday, up 94 per cent from Rs 9.2 trillion at the end of March last year.

In comparison, Tata Sons has cumulatively invested Rs 58,746 crore as equity in the 14. In FY21, it pumped in fresh equity in Tata Motors and Tata Power, based on the changes in its stake in these companies.

A majority of other Tata companies, including listed ones such as Tata Metaliks, Taj GVK Hotels, Rallis India, TRF, and Tata Steel Long, are owned and promoted by other group companies that Tata Sons owns and controls.

Tata Sons also owns small stakes in the various group companies through its unlisted subsidiaries such as Ewart Investments and Panatone Finvest. Including their stake, the market value of Tata Sons’ stake in the group companies works out to around Rs 10.62 trillion.

Ewart Investments, for example, owns minor stakes in nine Tata companies including Tata Steel, Tata Motors, Tata Power, Titan Company, Tata Consumer, and Indian Hotels.

Panatone Finvest is the single-largest shareholder, 44.8 per cent, in Tata Communications as on March 31, 2021.

With this, all Tata Sons’ investments in the group companies are now in the green or their market value exceeds the cost of investment with the exception of the group telecom venture, which languishes. For example, Tata Sons’ 19.58 per cent stake in Tata Teleservices (Maharashtra) (TTML) has a market value of Rs 639 crore against an investment cost of Rs 680 crore.

Tata Sons’ equity investment in five listed group companies -- Tata Motors, Tata Steel, Indian Hotels, Tata Chemicals, and TTML -- was in the red at the end of March last year.

The analysis is based on the book value or investment cost of Tata Sons’ equity stake in the group’s listed companies as reported by the company in its annual report and captured by Capitaline database.

The latest value is based on the company’s market capitalisation as on May 4, 2021.

TTML has been the top-performing Tata company with a 739 per cent rise in its market capitalisation since March last year, followed by Tata Elxsi, up 586 per cent and Tata Motors up 489 per cent. Other Tata companies with a big jump in market capitalisation last year include Tata Communications (up 467 per cent), Tata Steel (up 462 per cent), and Tata Power (up 305 per cent).

On the investment side, however, Tata Motors, Tata Steel, and Tata Power account for 70 per cent of all Tata Sons’ equity investments in the group companies but together these companies contribute just 17 per cent to the market value of Tata Sons’ equity investments.

Tata Sons’ equity stake in these companies is now worth Rs 1.05 trillion against an investment of around Rs 41,400 crore. These companies also contribute little by way of dividend to Tata Sons and the holding company continues to be disproportionately dependent on TCS to fund its investment activities.

Tata Motors has not paid dividend for five years in a row now; Tata Power has not raised its dividend payout for over a decade now and Tata Steel increased its dividend after a gap of 13 years in FY21.

Tata Motors is the single-biggest investment by the group holding company, followed by Tata Steel and Tata Power. Tata Sons has so far invested Rs 22,184 crore in Tata Motors, accounting for nearly 38 per cent of its all equity stakes in the group’s listed companies. Tata Sons’ equity investment in Tata Steel is around Rs 13,567 crore.

Analysts say it will take years of rallies and strong financial performance by group cash guzzlers for Tata Sons to make handsome gains on its investment.