Under N Chandrasekaran, Tata Sons earned ₹2.71 trillion dividend

He used the dividend bonanza to invest nearly ₹1 trillion in group unlisted companies and new ventures, more than its predecessors

Tata Sons earned the highest dividend income during outgoing Chairman N Chandrasekaran’s tenure. 

Tata Sons earned cumulative dividend income (including proceeds from shares surrendered under share buyback) of nearly ₹2.71 trillion under his stewardship since 2016-17 (FY17), much more than what his two predecessors got at their disposal. For comparison, under Cyrus Mistry, Tata Sons cumulatively earned around ₹27,800 crore during FY13-FY16 period at a rate of ₹6,950 crore per year — nearly a fourth of what Tata Sons earned on average per year during Chandra’s tenure. 

Chandra’s tenure also saw a big jump in Tata Sons’ other income, such as brand fee from group companies, treasury gains, and other non-recurring income. 

Under Ratan Tata, Tata Sons had cumulatively earned dividend income worth around ₹27,700 crore, or ₹2,130 crore per year, during FY00-FY12. However, nearly 40 per cent of Tata Sons’ revenues during his tenure came from stake sale in Tata Consultancy Services (TCS), including during its initial public offering (IPO) in August 2004. Ratan Tata’s successors didn’t have to reduce their stake in group companies to raise capital, thanks to a rapid growth in TCS’s profit and dividend payout in the last 15 years. 

Tata Sons progressively reduced its stake in TCS from 80.64 per cent immediately after its IPO to 73.75 per cent. Tata Sons currently holds 71.74 per cent stake in TCS, which operated as a division of the holding company before its demerger as a separate corporate entity in April 2004. Prior to the demerger, TCS’s revenues were part of Tata Sons’ operating income and accounted for nearly 93 per cent of the holding company’s total revenues during FY00-FY04. 

The big dividend bonanza during Chandra’s tenure largely came from TCS, with the holding company earning nearly ₹2.48 trillion from the IT major through dividends and share buyback between FY17 and FY26. This amount accounted for 91.7 per cent of Tata Sons’ all dividend income in the period. For comparison, TCS accounted for 91.6 per cent of Tata Sons’ all dividend income during the tenure of Cyrus Mistry.

 

Chandra used the dividend bonanza to invest heavily in ventures such as Tata Digital, Tata Electronics, and Air India, among others. The holding company made cumulative equity investment worth nearly ₹1 trillion in group unlisted ventures during FY17-FY26, net of the writeoff of its entire equity investment in Tata Teleservices during FY17-FY18. This includes its historical investment in Tata Capital that listed on the bourses in October last year and is now part of its listed investments. In contrast, Tata Sons made fresh equity investments of around ₹35,000 crore in group listed companies such as Tata Motors (now Tata Motors Passenger Vehicles), Tata Power, Tata Chemicals, Tata Consumer, and Tata Steel in the period. 

In comparison, under Cyrus Mistry, Tata Sons made equity investment of around ₹8,000 crore in group listed companies during FY13-FY16, and approximately ₹2,600 crore in unlisted companies.

 

Under Ratan Tata’s leadership, Tata Sons had invested around ₹18,000 crore in group listed companies during FY04-FY12, and around ₹16,000 crore in group unlisted ventures such as telecom, retail, broadcasting, financial services, and insurance.

 

The numbers clearly suggest that unlike his predecessors, Chandra expanded the group aggressively into new sectors and industries, leveraging the cashflows from TCS.

 

Annual dividend payout by TCS rose sharply under Chandra's tenure, and has remained at an elevated level despite a moderation in the last two years. Dividend payout by TCS was up 193 per cent in FY18 — the second year of Chandra tenure — to ₹27,107 crore, reaching a record high of ₹47,467 crore in FY24 (including share buyback), as the company began to distribute nearly 100 per cent of its annual net profit as equity dividend.

 

Only time will tell if these investments in new ventures will bear fruit for Tata Sons, as many of these unlisted ventures continue to make losses and may require further equity support from Tata Sons in future.