Tata Under Non-Tata: Charts Show How Profits Have Reboundedby
Gains at power, tech consulting businesses offset losses
Focus on profit, rather than growth, starting to take hold
Three years into the reign of Chairman Cyrus Mistry -- the first person outside of Tata Group’s founding family in more than seven decades to run India’s largest conglomerate -- his efforts to cut money-losing businesses and reduce costs are taking form.
Total operating profit at 25 listed Tata companies, the last of which reported last week, rose about 29 percent in the three years ended March 2016 and combined revenues climbed 25 percent, according to data compiled by Bloomberg. Those growth figures edge out the 23 percent expansion in the country’s gross domestic product during that period.
“Mistry’s efforts to boost profits are bearing some fruit,” said Jagannadham Thunuguntla, head of fundamental research at Karvy Stock Broking Ltd. in Hyderabad.
The market value of Tata’s 25 listed companies has risen 8.7 percent to 8.27 trillion rupees ($124 billion) this year as of Monday, outpacing the 0.7 percent rise in the benchmark S&P BSE Sensex’s market cap.
The group’s champion has been software exporter Tata Consultancy Services Ltd., India’s largest company by market value, which has seen operating profits surge 69 percent during that period. That helped Mistry weather through losses at the group’s steel and telecommunications businesses, while getting more ammunition to chip away at the conglomerate’s $33 billion in debt, the bulk of which was accumulated in a decade-long global acquisition spree under his predecessor.
Mistry’s emphasis on trimming, rather than acquiring, differs from his predecessor’s expansion drive, which backfired when falling prices pushed Tata Steel Ltd. into losses after losses. Mistry’s predecessor, Ratan Tata, increased debt 11-fold in his final 10 years as he expanded abroad, acquiring European steelmaker Corus Group Plc and marquee brands such as Land Rover, Jaguar, Tetley tea and New York’s Pierre hotel.
Tata companies are committed “to pursue growth across the world, including in India,” Tata Sons said in an e-mailed response. The debt brought with it “corresponding benefits that have accrued to the group, including acquisition of premium brands, entry into new markets, and access to new technology.”
At some of the other units such as Tata Power Co., retailer Trent Ltd. and pig-iron maker Tata Metaliks Ltd., profits have returned after they reported losses in 2013. The deficit at Tata Communications Ltd. was a third of levels in 2013.
“He is on the right track,” said Pankaj Sharma, Equirus Securities Pvt. Ltd.’s head of equities. “Mistry has certainly put profitability ahead of the size, top line and geographical diversification.”