Write-offs, investments in loss-making arms drain Tatas' dividend income

The past decade was the most productive for Tata Sons in terms of dividend income from group companies. The holding company cumulatively earned Rs 1.78 trillion as dividends and proceeds via share buybacks by group firms since 2013-14 — the highest among India’s private sector business groups.
 

A big chunk of this income, however, was used by Tata Sons to either write off bad assets or fund the recurring losses incurred by its unlisted subsidiaries in the telecom, retail, e-commerce, and aviation sectors.
 

 Tata Sons cumulatively had a dividend income of only Rs 20,000 crore in the preceding 10 years (FY04-FY13). Nearly 90 per cent of all Tata Sons dividend income and proceeds from share buyback in the past 10 years came from Tata Consultancy Services (TCS).
 

In FY23, Tata Sons earned a dividend income worth Rs 33,423 crore, accounting for 95.3 per cent of its total income of Rs 35,058 crore for the year. Historically, dividends and proceeds from share buyback account for 90 per cent of Tata Sons total income; the rest comes from brand fees and interest on its treasury operations.

The group holding company cumulatively wrote off investments and assets worth Rs 84,250 crore since FY14, equivalent to nearly 47 per cent of its estimated dividend income from group listed firms.

There was a decline in asset write-offs by Tata Sons in the past two years but it stepped up investments in loss-making ventures in the retail, aviation, e-commerce, and electronics manufacturing sectors. 

This raises the risk of large asset write-offs in the future, if these ventures don’t turn a profit soon.

 Asset write-offs are mostly related to Tata Sons’ past investment in its telecom subsidiary – Tata Teleservices. The holding company wrote off most of its past investments in Tata Teleservices and made additional equity investment worth Rs 995 crore in the company in FY23 to fund its continued losses. Tata Teleservices’ accumulated losses jumped from Rs 52,043 crore in FY22 to Rs 67,042 crore in FY23.

Asset impairment and write-offs by Tata Sons declined from Rs 14,110 crore in FY20 to Rs 1,240 crore in FY23. The period, however, witnessed a big jump in fresh equity investments by the holding company in loss-making entities, such as Tata Digital, Tata-SIA Airlines, and AIX Connect, formerly Air Asia (India). Tata Sons cumulative investment in its unlisted subsidiaries, joint ventures, and associates jumped from Rs 30,521 crore at the end of March 2020 to Rs 61,719 crore at the end of March 2023.

In contrast, Tata Sons equity investment in the group’s listed firms -- most of which are profitable -- went up by just Rs 584 crore in the past two years, from Rs 61.540.5 crore at the end of March 2021.

 For example, Tata Sons total investment in Tata Digital surged 30x in two years -- from just Rs 600 crore at the end of March 2021 to nearly Rs 19,000 crore at the end of March this year. Tata Digital now accounts for Tata Sons’ second-biggest investment, after Tata Motors. The holding company has cumulatively invested Rs 22,658 crore in Tata Motors, so far.

 Tata Digital reported accumulated losses worth Rs 2,765 crore on a standalone basis at the end of FY23, nearly double its accumulated losses worth Rs 1,395 crore a year ago.

Other key subsidiaries, such as Infiniti Retail (Croma stores), Innovative Retail Concepts, and Tata 1mg Healthcare Solutions, together reported accumulated losses worth Rs 4,821 crore in FY23, up from Rs 2,753.1 crore a year ago.

Tata Sons also pumped in fresh capital in Air India, Talace (Air India’s holding company), Tata SIA Airlines, and Tata Electronics. Tata Sons cumulatively invested nearly Rs 10,500 crore in Air India and Talace in the form of ordinary equity shares and preference shares. Air India accumulated losses increased to Rs 25,602 crore in FY23, from Rs 15,818 crore a year ago.

 Similarly, the holdco made additional equity investment worth around Rs 1,100 crore in Tata SIA Airlines, its 51:49 per cent joint venture with Singapore Airlines. Tata SIA accumulated losses increased to Rs 9,518 crore in FY23, from Rs 8,121 crore a year ago.

 Tata Sons also made a fresh equity investment worth around Rs 1,800 crore in Tata Electronics in the past two years. The subsidiary reported accumulated losses of Rs 623 crore in FY23, against Rs 91.2 crore a year ago.