Tata Sons earned Rs 19,600 cr as dividend, share buyback from TCS in FY19

Tata Sons, the holding and the promoter company of the Tata group, continues to remain dependent on Tata Consultancy Services to fund the investment and growth of other group firms.

In FY19, TCS accounted for 95 per cent of Tata Sons’ dividend from the listed companies of the bailiwick, the same as it was a year ago, but an increase over five years earlier. In FY14, the software major, in which Tata Sons owns 72 per cent, accounted for 85 per cent of the group coffers.

The holding company is estimated to have earned nearly Rs 19,600 crore as equity dividend and share buyback from TCS in the last financial year, up from around Rs 18,600 crore a year earlier. Other listed companies in the group paid a combined equity dividend of Rs 1,010 crore to Tata Sons in FY18, up from Rs 901 crore a year before.

The analysis is based on the financial year-end dividend payout and Tata Sons’ equity holding in various group companies beginning FY05. Tata Sons’ dividend income is not based on dividend payout by various group and not on accrual basis. For example, a group company’s dividend payout for FY18 would accrue to Tata Sons in FY19. Analysts say that TCS is central to the financial health of Tata Sons and the group at the consolidated level. 

“Most of the group companies with the exception of TCS and Titan Company (Titan Industries earlier) have struggled financially and operationally after the global financial crisis of 2008. Tata Sons has used its share of dividend income from TCS to provide equity support to other group companies and even diversify into newer sectors,” says G Chokkalingam, founder & MD Equinomics Research & Advisory Services.

It shows in the numbers. Growth in Tata Sons’ balance sheet and its equity investment in other group companies including unlisted subsidiaries and joint ventures has grown in step with its dividend income from TCS. 

For example, in the last five years, Tata Sons made incremental equity investments of around Rs 30,000 crore in group companies, including unlisted ventures in telecom, broadcasting, retail, housing, and infrastructure. 

The holding company also repaid the debt of Rs 50,000 crore its telecom subsidiary Tata Teleservices had, in June last year. Tata’ Sons’ dividend from Tata Consultancy Services, with small contributions from incremental borrowings, largely funded it.

In the last five years, Tata Sons has cumulatively earned around Rs 62,500 crore as equity dividend including proceeds from share buybacks. In the same period, the borrowings of Tata Sons were up to around Rs 14,500 crore. In comparison, other listed group companies netted an equity dividend of just Rs 3,800 crore to the holding company. 

Cumulatively, TCS has contributed nearly Rs 83,000 crore to Tata Sons’ coffers since its listing in 2004 by way of dividend and share buybacks, accounting for nearly 90 per cent of Tata Sons’ cumulative dividend during the period.

Analysts say a good showing by TCS has allowed Tata Sons and the group to maintain their pace of investment despite little or no contribution from some of the group biggest companies such as Tata Motors, Tata Steel, Tata Power, and Tata Chemicals. 

For example, Tata Motors, the group biggest company in terms of revenues and assets, has skipped dividend for three years in a row. In the case of other group companies, dividend payout has remained either stagnant or grown marginally since the 2008 Lehman crisis. 

For example, Tata Steel’s contribution to the group by way of equity dividend has grown at a compound annual growth rate 3.8 per cent in the last 10 years.

Tata Sons got around Rs 495 crore as equity dividend from Tata Steel the last financial year, up from Rs 342 crore in FY09. 

Dividend payout by Tata Power and Tata Chemicals has been stagnant for the past five years. 

Titan maintained double digit growth in dividend payout on a year-on-year basis but with an annual payout of Rs 444 crore in the last financial year, the amount is too small to move the needle at the group level.

Tata Sons’ dividend from TCS has found its way into the balance sheet of group companies such as Tata Motors, Tata Steel, Tata Power, and Indian Hotels by way of rights issues or issues of preference shares.