Tata Motors drives Tata group companies' finances to new high in FY24

Boosted by a sharp rise in Tata Motors’ earnings, the combined net profits of listed Tata group companies grew at a double-digit rate in 2023-24 (FY24), and the group balance sheet ratios showed the best health in 18 years.

Tata Motors’ consolidated net profit was up more than 1,200 per cent to Rs 32,203 crore in FY24 from the Rs 2,351 crore in FY23. The automaker accounted for 36 per cent of the group profits in FY24, a sharp jump from the 3.5 per cent the previous year.

The combined net profits (adjusted for exceptional gains and losses) of the group’s listed companies were up 34.9 per cent year-on-year (Y-o-Y) to an all-time high of Rs 89,766 crore in FY24 from the Rs 66,526 crore a year earlier.

With this, the group’s combined net profits in the last five years went up at a compound annual growth rate (CAGR) of 15.9 per cent, up from the 3 per cent for the FY14 to FY19 period. However, the group companies’ combined earnings had increased at a CAGR of 23.5 per cent during FY09-14, albeit partly due to a small base and a big acquisition. The group’s net sales were up 12.4 per cent to Rs 11.03 trillion in FY24 from Rs 9.82 trillion in FY23.

The combined net sales of Tata group’s listed firms were up 12.4 per cent to Rs 11.03 trillion in FY24 up from Rs 9.82 trillion a year ago.

In the last five years, net sales grew at a CAGR of 9.2 per cent, accelerating from the 4.5 per cent during FY14-19 but slower than the 13.1 per cent during FY09-14.

A faster growth rate in earnings in recent years has led to a steady improvement in the group balance sheet ratios and return on overall capital employed in the business, including shareholders’ equity. At group level the balance sheet has been deleveraged, which makes the group’s finances strong.

The group’s combined gross debt to equity ratio improved to 0.83X in FY24, the lowest since FY06 (it was 0.98X in FY23). At its peak, the ratio was 1.7X at the end of FY09, a year after Tata Steel completed the $12.2 billion acquisition of Corus Group, UK (renamed Tata Steel Europe in 2010).

The group companies’ combined gross debt was down 4.4 per cent Y-o-Y to Rs 3.2 trillion at the end of March FY24 from the Rs 3.34 trillion at the end of March FY23. The group’s borrowing had peaked at Rs 3.49 trillion at the end of March 2020.

In comparison, the group’s net worth or shareholders’ equity was up 13.7 per cent Y-o-Y to Rs 3.86 trillion at the end of March FY24, up from the Rs 3.4 trillion at the end of March FY23.

The group return on net worth, also called return on equity, improved to 22.2 per cent in FY24 from 19.6 per cent in FY23 and a just notch below 22.3 per cent in FY22, the highest since FY12.

Similarly, the group’s return on assets improved to 10.4 per cent in FY24, up from the 8.8 per cent in FY23 and the best since FY11. In comparison, the group’s return on assets was 6.2 per cent on average during FY09-13.

The group companies’ combined assets were up 5.1 per cent Y-o-Y to Rs 8.21 trillion at the end of FY24 from the Rs 7.81 trillion in FY23. Of this, the group’s fixed assets were up 7.7 per cent Y-o-Y to Rs 5.15 trillion at the end of FY24, growing at the fastest pace in the last three years.

The improvement in finances of the group’s listed companies has been led by Tata Motors, which has consolidated its position as the biggest group company in terms of revenues in FY24 and emerged the most profitable company after Tata Consultancy Services (TCS).

TCS remains the top profit contributor at 51.9 per cent, but its contribution was down from 63.4 per cent in FY23. TCS reported a net profit of Rs 46,620 crore in FY24, up 10.6 per cent from Rs 42,147 crore in FY23.

Tata Motors’ consolidated net sales were up 26.9 per cent Y-o-Y to Rs 4.35 trillion in FY24 and it accounted for 39.4 per cent of the group’s net sales compared to 21.8 per cent by TCS.

Tata Motors was also the second-largest dividend payer with a payout of Rs 4,676 crore in FY24, a sharp jump from the Rs 766 crore in FY23. TCS was on top with Rs 26,426 crore.