Tata consultancy services again
came into the lime light last week by announcing a strong first quarter results
and becoming the first Indian company to achieve the 5 lakh crore mark in terms
of market capitalization. The competitors to TCS such as ONGC, Reliance, ITC
etc. (in terms of market cap) are far below the level achieved by TCS.
So I just wanted to check how
much TCS is worth to Tata Sons compared to other Tata group companies.
For that I took 12 major Tata
group companies and collected their market cap (for July 24, 2014), Net sales
and net profit. (On a consolidated basis as on FY14)
The following interesting facts
have been observed.
The combined market cap of 12
Tata group companies are 814,681.81 lakh crore (as on July 24). The biggest contributor
is obviously TCS with a whopping 62.2 percent share in total market cap.
The next biggest gainer is Tata motors. But its contribution is 19.11
percent almost one third of TCS.
The next thing I considered is the net sales and net
profit (in a consolidated basis as on FY 14).
The revenues of 12 major Tata group companies for
FY2013-14 was at 562,496.87 crore in which TCS contributed to just 14.83
percent. Tata motors were the biggest contributor with a 41.86 percent share
followed by Tata Steel with 26.6 percent. But when we come to net profit
scenario, TCS contribution was 51.16 percent of the total net profit
(total reported net profit by these companies were 37,787.83 crore as on FY14)
reported by these companies. Tata motors secured the second position with 37.32
percent share (But most of its profit and revenue came from JLR) and Tata steel
came third with a meager 9.7 percent. Interesting isn’t it? The important
factor to consider in this scenario is even though TCS contributed a meager 15
percent to the Tata Group companies’ (that I have considered) revenues; TCS
contributed a whopping 51.16 percent share in net profit.
From these figures it is pretty much clear that it
is this single IT service company that have enabled Tata Sons to keep investing
in group companies. Tata group companies especially Tata steel and Tata motors
have huge debt in their books mostly because of the acquisition of JLR by Tata
motors and Corus by Tata steel in 2007. The situation got worsened because of
the global recession in 2008. Even though the JLR contribute significant amount
of bottom line to Tata motors, the performance of Corus is quite disappointing.
Even though Tata steel posted a net profit of 3663.90 crore in FY14, it
reported a net loss of 7,362.39 crore in the FY13 (in a consolidated basis). Apart
from this the recent announcement of Japan’s Docomo to quit the partnership
with Tata Tele services which they had in the telecom space and the recent
decisions to enter into the aviation sector with Air Asia and Singapore
Airlines also need a lot of money. Recently announced dividend payout of Rs. 12750 crore by TCS, the highest
ever dividend payout by an Indian company should be seen in this regard. Tata
sons will get around 9300 crore from this dividend payout since they have
around 74 percent stake in TCS which they can utilize for investment in group
companies.
So TCS is and continues to be the lender of the last
resort for Tata group.
Views are personal :)
Data collected from moneycontrol.com, firstpost.com
and the respective company websites.
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