This year a funny incident happened in the way of result season. After nearly a decade and a half, the Tata Group “Crown Jewel” has been displaced from its throne as the most profitable entity within the TCS Group. The new alpha in the Tata pack, it turns out, is also the oldest company within the Tata portfolio – Tata Steel.
Tata Steel has already registered profit 31,914 crore in the first nine months of the fiscal year through March, more than TCS’s profit 28,490 crores. This trend is likely to continue when the Tata Steel board meets on May 3 to take on board the consolidated numbers for the year, clear from the agenda, which includes not only dividend payments but also share splits.
This is a considerable change from just five years ago when Tata Steel reported losses, struggling under a mountain of debt and plunging global commodity prices after the previous commodities super-cycle ended around 2008. was equally difficult. TV Narendran The appointment of Tata Steel MD and sole Cyrus Mistry continues to play an important role even after Mistry’s ouster, Tata Steel has also managed to generate net positive inflows from its Europe operations, while domestically benefiting from Chinese rivals. Markets are growing through protection. Anti-dumping duty and iron ore cheaper than captive mines.
The fact that a legacy company has emerged as a big deal from the old economy part of the Tata empire, even as the group plans to make a major digital thrust, is a valuable reminder to both investors and the Tata leadership – even if The battle for the future customer’s mind and wallet-share is to be fought in the virtual world, with legacy companies such as Tata Steel and Tata Motors forming an important and valuable part of the real-life, brick and mortar world in which the consumer actually lives. This is something that Tata Sons chairman Natarajan Chandrasekaran may now have to keep in mind as he restructures and rebuilds the group for the future.
TCS has been a cash cow for Tata Sons, providing a major chunk of its income: Tata Sons gets approx 22,500 crore received from TCS last year- 11,371 crore as dividend from its TCS stock holdings and 11,121 crore from share buyback by TCS.
Chandra has turned to TCS and TCS executives to fulfill his ‘One Tata’ vision for the group. His digital vision for the group will be driven by TCS veteran Prateek Pal, who is the new head of Tata Digital, the apex arm for the group’s digital assets. AS Lakshminarayanan, CEO and MD, Tata Communications, and N Sivasamban, CEO of Tata Communications Transformation Services (TCTS), are also former TCS. Even as last week’s management tweaked the group’s latest acquisition, TCS had many faces in Air India. Importantly, however, other Tata entities also had managers. While Chandra himself is heading Air India in the absence of the CEO, Tata Steel’s HR head Satya Ramaswamy is the new CHRO at Air India, the former head of strategic initiatives at Tata Digital being the airline’s chief digital officer, while a team from Taj Hotels Working on improving passenger amenities.
On the balance sheet and personnel front, companies other than TCS are finally starting to make a mark. This could be a major risk mitigation for Tata Sons in the long run compared to its ongoing program of consolidation and restructuring.