Tata Sons’ insurance, auto arms defy pandemic blues
Telecom, airline businesses continue to remain a drag for holding company
Tata Sons key unlisted subsidiaries reported double-digit growth in revenues and contraction in their losses on a consolidated basis in FY21 despite the economic disruption caused by the Covid-19 pandemic.
The combined turnover or total income of Tata Sons’ 40 biggest unlisted subsidiaries was up 17.8 per cent year-on-year (YOY) to ~80,720 crore in FY21 from ~68,538 crore a year ago. The combined net loss of these subsidiaries narrowed to ~10,654 crore last financial year from a combined net loss of ~16,839 crore a year ago.
The growth was led by insurance, retail lending, auto components, defence manufacturing and retail. In comparison, the telecom and airline businesses continue to remain a drag on Tata Sons finances.
Tata Teleservices remains a cash guzzler and reported a net loss of ~8,901 crore in FY21. It was followed by Tata SIA Airlines that reported a net loss of ~1,612 crore last financial year on revenues of ~2,244 crore. Airasia (India) also reported a net loss of ~1,532 crore last financial year. (See the adjoining chart)
In all, Tata Sons has reported 268 subsidiaries in its annual report for FY21, up from 262 last year. This includes listed subsidiaries such as Tata Consultancy Services and Tata Communications along with step-down units. Tata Sons' other listed subsidiaries include Tata Investment Corporation and Tata Tele (Maharashtra). Our analysis excludes listed units and their subsidiaries.
Including all its listed subsidiaries, joint ventures and associates, Tata Sons reported consolidated revenues of ~2.44 trillion in FY21, up 3 per cent from ~2.37 trillion a year ago. Tata Sons consolidated net profits, however, nearly doubled to ~28,200 crore from ~14,300 crore a year ago. The company's consolidated net worth was up 7.2 per cent YOY to ~4.41 trillion. Tata AIA Life Insurance Company, Tata International, Tata Capital (TCL), Tata AIG General Insurance and Tata Autocomp Systems remain Tata Sons five biggest unlisted subsidiaries, accounting for nearly 75 per cent of the combined revenues of all unlisted subsidiaries. Tata Sons' other key unlisted subsidiaries include Infiniti Retail, Tata Sky, Tata SIA Airlines and Tata Advanced Systems.
Tata International, TCL and Tata Autocomp Systems themselves are holding and investment companies, like Tata Sons, having many unlisted subsidiaries.
We added the finances of major subsidiaries of these companies to arrive at a consolidated number. The consolidation is however not complete and many small subsidiaries (in terms of revenues) were left out. Among individual companies, Tata AIA Life Insurance Company reported the biggest jump in revenues. Its revenues were up 131 per cent in FY21 to ~19,787 crore from ~8,576 crore a year ago, while net profit was up 44 per cent to ~47.1 crore. Automotive parts maker Tata Autocomp Systems reported 59 per cent YOY jump in its revenues in FY21 to ~5,865 crore but its losses widened last financial year. In contrast, Tata SIA Airlines revenues more than halved last financial year while Tata Teleservices reported 13 per cent decline in revenues. The big losses in the telecom, airlines and retail businesses resulted in Tata Sons infusing capital into various unlisted arms in the financial year 2021 so that they can meet their liabilities.
According to its annual report, Tata Sons made incremental equity investment of around ~11,000 crore in various group companies in FY21. With this, the company has cumulatively invested nearly ~96,000 crore in various group companies.
Tata Sons has infused ~3,500 crore in Tata Capital Ltd (TCL) in the last two financial years. TCL filings show that it had adequate cash and liquid investments and unutilised bank lines across subsidiaries. It also had a diversified funding profile, financial flexibility and healthy provision cover (65 per cent as on March 31, 2021).
In FY21, on a consolidated basis, TCL reported a profit after tax (PAT) of ~1,299 crore as compared to ~446 crore a year ago.
Tata Sons has infused about ~46,595 crore from January 1, 2014, to June 30, 2019, into Tata Teleservices to fund losses, debt repayments as well as for capital expenditure. Revenue from operations for Tata Teleservices during FY21 declined by 13 per cent over FY20. Revenue for FY21 is not directly comparable with the previous year as revenue for FY20 included income from the consumer mobile business segment till Q1 of FY20.