Tata group hit by earnings slowdown, mcap decline in last two years

Tata companies' combined adjusted profit rose just 1.2% in FY26, while their combined market capitalisation fell 16.9%, underperforming the Nifty 50.

N Chandrasekaran, who has decided to resign as Tata Sons chairman, faced the same dilemma as the group’s previous two chairmen faced in their final years in office: an earnings slowdown, and a poor show by group companies on the bourses. The only difference is Chandrasekaran not only faces muted financial performance from the group’s listed companies, but also mounting losses at Tata Sons’ unlisted subsidiaries, many of which have been set up by him in the last decade. 

Both Ratan Tata, who retired from the chairmanship in December 2012, and Cyrus Mistry, who was fired from his job in October 2016, faced financial headwinds in their final years of office. 

However, to Chandrasekaran’s credit, he managed to turn around the domestic passenger vehicle (PV) business of Tata Motors — a success that eluded both his predecessors. He also put Indian Hotels, Tata Steel, and Tata Consumer (Tata Global Beverages earlier) back on the growth path after years of financial struggle. As a result, there was a sharp deleveraging of the group companies’ balance sheets, with the listed companies’ gross debt-to-equity ratio improving to 0.7 in financial year 2025-26 (FY26) from 1.1 in FY17. The group average return on net worth improved to 19 per cent in FY26 compared to 16.2 per cent in FY17 and 18.6 per cent in FY12. 

The combined net sales of listed Tata companies — excluding Tata Capital that listed on the bourses in October last year — was up just 3.9 per cent year-on-year (Y-o-Y) in FY26, a slight improvement from 2.5 per cent Y-o-Y growth in FY25. The group companies’ combined net profit (adjusted for exceptional gains and losses) was up just 1.2 per cent Y-o-Y in FY26, a small improvement from 1.1 per cent decline in FY25. Listed Tata companies’ combined net sales (ex-Tata Capital) grew to ₹11.8 trillion in FY26, while their combined adjusted net profit inched up to ₹90,698.4 crore in FY26 from ₹89,617.6 crore in FY25, and ₹90,590.5 crore in FY24. 

A bigger challenge for Chandrasekaran is Tata companies’ poor show on the bourses. The combined market capitalisation (mcap) of Tata group listed companies — excluding Tata Capital and listed subsidiaries of other group companies — was down 16.9 per cent Y-o-Y in FY26 against 3.7 per cent decline in the combined mcap of the benchmark Nifty 50 companies in the period. With this, Tata group companies underperformed the benchmark indices for a second year in a row. Tata companies’ combined mcap had declined by 8.1 per cent in FY25 compared to 4.4 per cent growth in Nifty 50 companies’ combined mcap that year. This is the first time since at least FY11 that Tata companies’ combined mcap declined for a second consecutive year. 

Tata companies’ combined mcap declined to around ₹22.82 trillion at the end of March this year, from a record high of around ₹29.88 trillion at the end of March 2024. In comparison, Nifty 50 companies’ combined mcap grew to ₹179.9 trillion at the end of March this year from ₹179.1 trillion at the end of March 2024. 

Tata companies’ combined mcap recovered to ₹25.5 trillion, while Nifty companies’ combined mcap grew to ₹198.9 trillion on Wednesday (August 12). 

Tata companies have underperformed the benchmark indices under Chandrasekaran, after being ahead of the broader market between FY20 and FY24. The group’s combined mcap has increased 233.9 per cent since March 2016 against 276.3 per cent rise in the combined mcap of Nifty 50 companies in the period. 

Tata companies’ combined adjusted net profit had declined by 3 per cent Y-o-Y in FY12 to ₹26,496.7 crore. The group, however, was still growing in high double digits, and the combined net sales were up 24.5 per cent Y-o-Y to ₹4.32 trillion in FY12. The group’s combined mcap had declined by 3.6 per cent Y-o-Y in FY12, compared to 4 per cent decline in combined mcap of Nifty 50 companies. Tata group mcap had fallen to ₹4.4 trillion at the end of March 2012, whileNifty 50 companies’ mcap had declined to ₹35.2 trillion by that time. 

In FY17, Tata companies’ combined adjusted net profit was down 5 per cent Y-o-Y to ₹35,292 crore, while the group combined net sales were up just 2.1 per cent Y-o-Y to ₹5.93 trillion. 

Chandrasekaran’s growth strategy has also been challenged by a growth and earnings slowdown at Tata Consultancy Services (TCS), the prime source of equity capital for Tata Sons which it uses to seed new ventures or provide financial support to group's loss-making companies. TCS adjusted net profit was up 8.3 per cent Y-o-Y in FY26, while its mcap was down 34.6 per cent Y-o-Y. This was its worst yearly show in at least last 15 years. Annual dividend payout by TCS declined by 12.7 per cent Y-o-Y in FY26 on the back of 3.9 per cent cut in dividend payout by the company in FY25. This is expected to weigh on Tata Sons revenues and profits for FY27.