Tata Sons' FY19 net rises 30% to Rs 1,144 crore on TCS share buyback

Tata Sons, the holding company of the Tata group, reported a 30 per cent rise in its net profit at Rs 1,144 crore for the financial year ended March 2019 — thanks to the company selling part of its stake worth Rs 10,630 crore in the share buyback offered by its cash-rich subsidiary Tata Consultancy Services (TCS).

The huge cash gain of the company from the TCS buyback could have translated into higher profits but stood reduced because the company wrote off its investments in Tata Teleservices to the tune of Rs 14,690 crore during the year, according to the Tata Sons 2018-19 annual report.

In the previous year, Tata Sons had taken a far bigger write-off worth Rs 28,651 crore when it repaid liabilities of the loss-making telecom subsidiary to banks.  

Total income, on the other hand, declined by 27.7 per cent year-on-year to Rs 20,229 crore in FY19. While revenue from operations, which is mainly dividends from subsidiaries, grew 10.5 per cent, other income dipped by 44.9 per cent. In the financial year 2017-18, Tata Sons had sold TCS shares worth Rs 9,000 crore in the open market, which had resulted in higher other income.

Soon after taking over as chairman, N Chandrasekaran transferred the wireless telephony business of subsidiary Tata Teleservices to Bharti Airtel for free and paid off all bank and government dues worth close to Rs 50,000 crore. Tata Sons also had to buy back Tata Teleservices shares from its equity partner DoCoMo, which resulted in additional liability in fiscal 2018. The clean-up of "legacy issues", as raised by Tata Sons former chairman Cyrus Mistry, especially Tata Teleservices liabilities, is expected to continue in the present financial year also.

Interestingly, excluding “other income”, the operating profit of the company declined by 14 per cent to Rs 5,138 crore in 2018-19.
 

When contacted, a Tata Sons spokesperson declined to comment.

During the year, Tata Sons also bought back non-convertible debentures worth Rs 7,000 crore from insurance companies such as Life Insurance Corporation of India (LIC), as insurance regulations bar insurers to invest in private limited companies. 

Tata Sons became a private limited company in fiscal 2018, which prompted the buyback of its debt instruments from insurance companies.

Tata Sons’ net debt grew by over 50 per cent from Rs 18,142 crore in FY18 to Rs 27,587 crore in the financial year ended March 2019. As a result, its finance cost also rose by 36.5 per cent.

As the company raised debt from overseas markets for the first time, the company incurred a hedging cost of Rs 476 crore. Its overseas borrowings were Rs 9,683 crore for 2018-19. The employee cost of the company also rose to Rs 399 crore, up 67 per cent as compared to Rs 239 crore reported in FY18.

The company has proposed higher dividend of 1,000 per cent to its shareholders which includes Tata Trusts and the Mistry family.