DoCoMo payout leads to steep fall in Tata Sons’ profit
Drops 72% to ~832 cr in 2016-17
The net profit of Tata Sons, the unlisted holding company of the Tata group, declined by 72.4 per cent to ~832 crore in 2016-17 from the previous year’s ~3,013 crore. The company took a hit of ~4,000 crore following NTT DoCoMo exercising its option to sell its 26 per cent stake in Tata Teleservices.
Tata Sons’ revenues were up 23.2 per cent to ~9,984 crore from ~8,104 crore, boosted mainly by “other income” of ~2,169 crore from the sale of its 24 per cent stake in its insurance venture, Tata AIA Insurance, to the AIA group. The AIA deal was concluded during the time of former chairman, Cyrus Mistry.
Despite falling profits, Tata Sons maintained its dividend at the same level as last year’s ~323 crore, thus keeping a steady source of income for the Tata Trusts. The Tata Trusts own a 66 per cent stake in Tata Sons and use the proceeds of the dividend income for various charitable activities.
The Tata Sons annual report also said Chairman Emeritus Ratan Tata continued to be involved in various affiliations and matters that were of value to the group. “Ratan Tata continues to be a special and permanent invitee at all board meetings and has access to all records,” the report, reviewed by this paper, said.
When contacted, a Tata Sons spokesperson said the company did not comment on such matters because it was unlisted. Tata Sons’ gross debt went up to ~21,019 crore from ~15,768 crore as it made more investments in Tata Teleservices and it also had to raise debt to redeem preference shares that were issued to the Tata Trusts. Tata Teleservices continues to be the biggest problem for Tata Sons as, apart from buying back shares of the company from NTT DoCoMo for ~8,750 crore as awardedby the London Court of Arbitration to the Japanese firm, Tata Sons will need to invest another ~12,000 crore in the loss-making firm in the next few quarters.
Besides, Tata Sons will have to take an impairment on Tata Teleservices shares, which was not done in 2016-17 and hence was qualified by the auditors.
The annual report mentions various cases filed in the National Corporate Law Tribunal by former chairman Cyrus Mistry and Nusli Wadia, former director of group companies Tata Chemicals, Tata Steel and Tata Motors who was removed from the boards of the three companies at the peak of the corporate battle between Mistry and Ratan Tata.
Litigation with Chennaibased entrepreneur C Sivasankaran is not mentioned in the report as the matter is under arbitration. Sivasankaran had sent a legal notice to Tata Sons last year after the company had asked him to buy back NTT DoCoMo’s shares. Sivasankaran had threatened to sue Tata Sons and Tata Teleservices for mismanagement of the wireless telephony company.