Tata Group still derives 80% of its profits from only 20% of the companies in the group even as its chairman Cyrus Mistry tries to build more profitable units to trim down reliance on some companies for earning profits.
India's largest business house still earns a major chunk of its profits from Tata Consultancy Services (TCS), Tata Steel and Tata Motors, even though it owns about 100 companies. TCS and Tata Motors contribute to more than 90% of the profit earned by the group.
While the standalone profit of Tata Sons trebled to Rs 9,062 crore in the last fiscal year ending March 2015, its consolidated profit rose 5% to Rs 19,180 crore. A sharp rise in the standalone profit was due to higher dividend from TCS, which posted 3.6% increase in profit for FY15.
The Mumbai-based software major TCS handed out a dividend of Rs 15,474 crore to its shareholders last fiscal year, replacing state-owned miner Coal India as the highest dividend payer in the country.
Tata Sons, which has a stake of 74% in TCS, was given a dividend Rs 11,450 crore, more than twice it earned in the previous fiscal year, 2013-14. The dividend was also slightly more than revenues earned by pharma giant Cipla in FY15.
However, its consolidated profit in the last fiscal year was weighed down by stagnant growth of Tata Motors and Rs 3,925 crore loss incurred by Tata Steel.
"Some of the Tata group companies have been under pressure owing to industry issues such as steel," The Economic Times quoted AS Thiyagarajan, Singapore-based senior managing director at Aquarius Investment Advisors, as saying.
"So, while there may not be overnight changes visible in terms of performance of other companies, the fact that Mistry is focused on consolidating and strengthening the performance of other group companies will help in the long term," he said.
Meanwhile, the market capitalisation of the 26 listed companies of Tata group has seen an increase of 46% to Rs 7.21 lakh crore since Mistry became the chairman of Tata Sons in December 2012.
At an internal meeting held recently, Mistry reportedly stated that the group will focus on "building strength" over the next five years apart from "reconfiguring and reconstructing group businesses to be more resilient."
"There are concerns that more companies in the group ought to be stronger and leaders in their respective sectors and the focus is to commit investments and focus towards that," a senior Tata group executive said.