Tata Sons' FY25 revenue is likely to be lower despite record dividends
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Tata Sons, the privately held parent company of the Tata group, will likely see its revenues shrink in 2024-25 despite receiving record dividend income from the group companies.
The reason: Last fiscal's one-off income from the sale of Tata Consultancy Services (TCS) Ltd shares.
The company's dividend income from 11 listed companies surpassed the ₹35,000-crore mark in 2024-25, which is the highest ever, showed data compiled by Mint.
However, since Tata Sons sold TCS shares worth approximately ₹9,000 crore in the open market in 2023-24, its income is likely to see a decline in the latest fiscal.
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Dividends and share buybacks from group companies account for nearly all of Tata Sons' top line. While the conglomerate has 26 listed companies, the 11 companies used in this analysis account for over 95% of dividend income of the holding firm.
The company received a dividend income of ₹21,529 crore in 2023-24, according to its annual report. In addition, it received ₹10,548 crore from a TCS share buyback, taking its total payout from group companies to ₹32,077 crore.
Adding revenue from other sources like Tata brand usage feeds and the sale of TCS shares took Tata Sons' 2023-24 revenue to ₹43,893 crore.
Tata Sons did not respond to Mint's queries.
Reaping dividends
TCS, where Tata Sons holds a 71.74% stake, led the pack with a dividend of ₹32,184 crore in 2024-25. In fact, a 12% increase in the payout from TCS is the reason why the dividend income of Tata Sons has hit a fresh record in 2024-25 despite a dip in dividends from three other companies.
Tata Steel and Tata Motors were the next two highest dividend returning units of Tata Sons, with a payout of ₹1,427 crore and ₹947 crore.
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'The reason for growth in dividends is because of the improving profitability of most large Tata group companies and likely the lack of suitable reinvestment opportunities for those companies," said Shriram Subramanian, the managing director of proxy advisory firm InGovern Research Services.
For instance, TCS generates the highest free cash flow within the group. The company will need to payout the cash as dividends due to a slowdown in the IT services sector leaving it with few investment opportunities, Subramanian added.
Tata Sons also needs these dividends as the company has to invest in fledgling businesses like Air India and Tata Electronics, which take up a lot of capital, he added.
Air India is the privately held aviation business of the Tata group while Tata Electronics, which is also private, assembles iPhones for Apple Inc. on a contract basis and is setting up semiconductor manufacturing fabs.
The Chandra factor
The dividend income of Tata Sons has surged sharply during the tenure of chairman N. Chandrasekaran who took over the reins on 21 February 2017.
The 2024-25 dividend income is up five-fold since 2016-17. Seven of the 11 listed Tata group companies analyzed returned dividend in excess of ₹100 crore to Tata Sons. Only three of these companies had paid the parent over ₹100 crore dividend in 2016-17.
'The Tata group of companies is a very large group, and one person alone cannot be responsible for its performance or the lack of it," Subramanian said.
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'However, Mr. Chandrasekaran has, in the past eight years, brought some dynamism and tried to consolidate businesses," he added.
Chandrasekaran joined the board of Tata Sons in October 2016 and took over as the chairman in February 2017.
He also chairs the boards of Tata Steel Ltd, Tata Motors Ltd, Tata Power Co. Ltd, Air India Ltd, TCS and several group operating companies. He worked in TCS for 30 years, including eight years as its chief executive until 2017.
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