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Tata Sons will complete investing ₹10,000 crore in group entities this year as part of Chairman N Chandrasekaran’s plan to clean up the capital structure and strengthen the companies’ balance sheets.
The investments, in the form of equity, have been made in companies that were highly leveraged, including Tata Capital, Tata AIG General Insurance and Tata Housing.
Funds have also been infused in Vistara and Air Asia to help the two airlines execute their respective growth strategies.
The investment plan, started two years back, will be completed this year, according to sources close to the group. “The entire focus has been to improve the debt-to-equity and EBITDA-to-debt ratios. The capital structure of most of the companies is on track. The cash flows have improved as a result of the strategy,” said a source aware of the group’s game plan under Chandra.
In addition to the ₹10,000-crore equity infusion, Tata Sons has also pumped nearly ₹50,000 crore into the debt-laden telecom business – Tata Teleservices. The mobile business under Tata Teleservices has been sold off to Airtel after an agreement with the Japanese joint venture partner NTT DoCoMo; and settling the debt to banks. The overall investment across group companies has been close to $10 billion by Tata Sons in the last two years just to clean up the balance sheet. To meet the fund requirements partially, Tata Sons had sold shares worth ₹9,000 crore in its top performing group company, TCS, last year.
Fresh investments coupled with the strategy to find synergies within the group have helped some of the highly leveraged companies to get back on track. For example, last year, the real estate and infrastructure businesses were brought under one roof to simplify structures and fast-track growth.
Recently, Tata Chemicals’ consumer business, which mainly includes the salt segment, was merged with Tata Global Beverages. Similarly, all group entities have been brought under 10 broad verticals. There will be a review on what businesses will be retained and which ones to divest. Chandra has also simplified the group structure by reducing cross-holdings between group entities. Tata Steel, for example, two years back held equity in 13 other listed Tata entities. Eighty-five per cent of this exercise across the group has been completed. The remaining will be done by the year-end.
In growth mode
According to sources, now that the capital restructuring exercise is almost done, Chandra is pushing the group companies to get into growth mode. “Fresh investments to be made by Tata Sons will only be aimed at entities driving growth. The message from Chandra was clear – If you want to run fast you need to be fit,”said the source.
The strategy seems to be paying off. With the overall debt-to-equity ratio dropping below 1, Tata group is getting fit to chase growth.
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