Tata Sons makes ~16K-cr provisions for telco business
Tata Sons, the holding company of Tata Group, has made provisions of ~16,439 crore for its now closed telecom business, according to the annual report of the company for the financial year ended March 2020.
With this, the total amount written off by Tata Sons for its telecom business now is close to ~60,000 crore.
In December 2019, the Department of Telecommunications (DOT) raised a consolidated demand for ~16,612 crore towards licence fees, spectrum usage charges, interest, penalty and interest on penalty on Tata Teleservices (TTSL) and Tata Teleservices (Maharashtra) (TTML), following a Supreme Court order.
Tata Sons has already made the payments of ~2,197 crore against this, according to the report.
Tata Sons’ dividend remained the same at ~404 crore as last year, in order to enable TTSL to discharge its obligations, including operational requirements. It infused an additional ~7,000 crore into the telecom arm and made provisions of ~16,439 crore relating to TTSL and TTML.
For the financial year, at the consolidated level, the company's profit after tax has come down to ~10,916 crore from ~28,463 crore, mainly due to a rise in exceptional items. At standalone level, its profit before exception items and taxes was ~19,822 crore. Its profit before tax was ~2,679 crore after exceptional items of ~17,142 crore.
Interestingly, the auditors have raised concern regarding Tata Steel Europe and Airasia India’s ability to continue as a going concern. The auditors said the impact of the Covid19 global pandemic would require Tata Steel Europe to access group company support in order to meet its obligation as they fall due.
Tata Steel Europe has received a letter from TS Global Procurement Company undertaking to provide working capital and/or other cash support up to a specified amount, which exceeds the amount forecast as being required by Tata Steel Europe over the next year.
The letter states that it represents present policy, is given by way of comfort only and is not to be construed as constituting a promise as to the future conduct of TS Global Procurement Company or Tata Steel.
“Accordingly, there can be no certainty that the funds required by Tata Steel Europe will in fact be made available. These conditions, along with the other matters explained in the special purpose financial information, indicate the existence of a material uncertainty, which may cast significant doubt about Tata Steel Europe’s ability to continue as a going concern. The special purpose financial information does not include the adjustments that would result if Tata Steel Europe were unable to continue as a going concern,” the auditor warned.
On Airasia India, the auditors said the airline had accumulated losses and its net worth has been fully eroded. “Airasia (India) has incurred a net loss during the current and previous year and Airasia (India)’s current liabilities exceeded its current assets as at the balance sheet date by ~1,208.89 crore.