If there was no TCS, there may be no Tata group worth speaking about - Firstpost

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If there was no TCS, there may be no Tata

group worth speaking about
by FP Editors Jul 24, 2014 15:55 IST

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The Tata group, which has over 100 companies under its fold, is often described as a
salt-to-software conglomerate, indicating the wide range of sectors the group has
operations in.
But line up the group in terms of value and net worth, and all you will see is software.
Tata Consultancy Services (TCS), which has become the darling of the bourses over the
last decade as Infosys slipped, accounts for 60 percent of the group's market valuation
and nearly 75 percent of its net worth. Put another way, the worth of the rest of the
group is a third of TCS.
Yesterday (23 July), TCS crossed a market capitalisation of Rs 5,00,000 crore at a time
when the market value of the rest of the group was all of Rs 3.4 lakh crore (see table).
TCS's market-cap was more than the next four Indian IT majors (Infosys, Wipro, HCL
Tech and Tech Mahindra) put together.

M-cap and net worth of listed Tata group companies

Market cap[Rs

http://www.firstpost.com/business/money/if-there-was-no-tcs-there-may-be-no-tata-group-worth-speaking-about-1981083.html[Monday-26-01-2015 2:43:11 AM]

If there was no TCS, there may be no Tata group worth speaking about - Firstpost

Company

% share of total M-cap

cr]

Net worth[Rs cr]

% share

TCS

506.696

59.9

374.448

74.3

Tata Motors

155.716

18.4

53.457

10.6

53.897

6.4

16.897

3.4

Titan Company

30.23

3.6

16.04

3.2

Tata Power Co.

27.878

3.3

9.211

1.8

Tata Comm

11.078

1.3

8.307

1.6

Tata Global

9.706

1.1

3.407

0.7

Tata Chemicals

8.774

2.725

0.5

Indian Hotels

7.586

0.9

2.847

0.6

Voltas

6.671

0.8

2.021

0.4

Tata Steel

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In other words, it is software revenues and profits that make the Tata group a group even though the group's original flagship companies were Tata Steel and Tata Motors.
A decade of aggression has left the Tatas over-dependent on TCS to bring home the
bacon. Aggressive expansion helped TCS grow sales dramatically, making it India's
most valuable company - and on course to become India's first $100 billion market-cap
company (it is currently hovering around $85 billion). TCS grew revenues nearly ninefold from Rs 9,748 crore to Rs 81,809 crore in 2013-14. The company was listed in

http://www.firstpost.com/business/money/if-there-was-no-tcs-there-may-be-no-tata-group-worth-speaking-about-1981083.html[Monday-26-01-2015 2:43:11 AM]

If there was no TCS, there may be no Tata group worth speaking about - Firstpost

2004.
But aggression cost some other Tata companies heavily. Tata Steel's acquisition of
Corus Steel in 2007, which was quickly followed by the global financial crisis in 2008,
resulted in huge debts (currently around Rs 59,788 crore, or $10 billion), according to
a computation by the Business Standard.
Tata Power got done in by its massive port-based Mundra project that was to be based
on "cheap" imported coal. But cheap turned expensive when Indonesia began taxing
coal exports heavily. The net result was Tata Power now has a huge debt overhang of
more than Rs 33,000 crore and weak profitability. Servicing the debt is one huge task.
The group also has to buy out Japan's DoCoMo from Tata Teleservices- at a possible
exit price of Rs 7,200 crore.
The group, however, got its act completely right with its acquisition of Jaguar Land
Rover (JLR) which has been very profitable - profitable enough to rescue the mother
company from huge losses in the domestic auto market.

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It is the Tatas' lucky break with JLR that makes the group at least marginally less of a
software conglomerate: Tata Motors' valuation was a hefty Rs 1,55,000 crore, or 18.4
percent of the group's total. Most of that value comes from JLR.
If Tata Steel was the bedrock on which the group was originally built, TCS is the muscle
that now bankrolls the group in substantial measure.
The JLR acquisition would not have been possible without the cash flows from TCS.
DoCoMo cannot be bought out from Tata Teleservices without TCS money. Tata Steel's
huge debts cannot be amortised merely with earnings in steel.A big chunk, nearly Rs
30,000 crore, falls due in 2015, says the BS report. While some of the money may come
from selling off non-core assets or from improved cash flows from the European
operations, it is the TCS money muscle that really backstops the flagship's financial
burdens.
Tata Steel is the third most valued member of the group, but its market value is just 6.4
percent of the group's total, and just 3.4 percent of the net worth.
TCS, on the other hand, is going from strength to strength. Over the last nine years, its

http://www.firstpost.com/business/money/if-there-was-no-tcs-there-may-be-no-tata-group-worth-speaking-about-1981083.html[Monday-26-01-2015 2:43:11 AM]

If there was no TCS, there may be no Tata group worth speaking about - Firstpost

turnover has grown nearly nine-fold from Rs 9,748 crore to Rs 81,809 crore.
In July and August, TCS will pay out Rs 12,750 crore as dividends, of which over Rs
9,300 crore goes to Tata Sons, the owner of TCS and group holding company.
It is dividends from TCS that have enabled Tata Sons to keep investing in group
companies and raise larger amounts of debt to fuel the group's growth or staunch its
losses.
Maybe it's time to make TCS the flagship of the Tatas. The child has become the father
of the man.
(Data analysis by Kishor Kadam)

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http://www.firstpost.com/business/money/if-there-was-no-tcs-there-may-be-no-tata-group-worth-speaking-about-1981083.html[Monday-26-01-2015 2:43:11 AM]

If there was no TCS, there may be no Tata group worth speaking about - Firstpost

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http://www.firstpost.com/business/money/if-there-was-no-tcs-there-may-be-no-tata-group-worth-speaking-about-1981083.html[Monday-26-01-2015 2:43:11 AM]