Docomo payout leads to steep fall in Tata Sons' profit

The net profit of Tata Sons, the unlisted holding company of the Tata group, declined by 72.4% to Rs 832 crore in 2016-17 from the previous year’s Rs 3,013 crore.

The company took a hit of Rs 4,000 crore following NTT Docomo exercising its option to sell its 26% stake in Tata Teleservices.

Tata Sons’ revenues were up 23.2% to Rs 9,984 crore from Rs 8,104 crore, boosted mainly by “other income” of Rs 2,169 crore from the sale of its 24% stake in its insurance venture, Tata AIA Insurance, to the AIA group.  The AIA deal was concluded during the time of former chairman, Cyrus Mistry.

Despite falling profits, Tata Sons maintained its dividend at the same level as last year’s Rs 323 crore, thus keeping a steady source of income for the Tata Trusts. The Tata Trusts own a 66% stake in Tata Sons and use the proceeds of the dividend income for various charitable activities.

The Tata Sons annual report also said Chairman Emeritus Ratan Tata continued to be involved in various affiliations and matters that were of value to the group. “Ratan Tata continues to be a special and permanent invitee at all board meetings and has access to all records,” the report, reviewed by this paper, said.

When contacted, a Tata Sons spokesperson said the company did not comment on such matters because it was unlisted.

Tata Sons’ gross debt went up to Rs 21,019 crore from Rs 15,768 crore as it made more investments in Tata Teleservices and it also had to raise debt to redeem preference shares that were issued to the Tata Trusts.

Tata Teleservices continues to be the biggest problem for Tata Sons as, apart from buying back shares of the company from NTT Docomo for Rs 8,750 crore as awarded by the London Court of Arbitration to the Japanese firm, Tata Sons will need to invest another Rs 12,000 crore in the loss-making company in the next few quarters.

Besides, Tata Sons will have to take an impairment on Tata Teleservices shares, which was not done in 2016-17 and hence was qualified by the auditors.

The annual report mentions various cases filed in the National Corporate Law Tribunal by former chairman Cyrus Mistry and Nusli Wadia, former director of group companies Tata Chemicals, Tata Steel and Tata Motors who was removed from the boards of the three companies at the peak of the corporate battle between Mistry and Ratan Tata.

Litigation with Chennai-based entrepreneur C Sivasankaran is not mentioned in the report as the matter is under arbitration. Sivasankaran had sent a legal notice to Tata Sons last year after the company had asked him to buy back NTT Docomo’s shares. Sivasankaran had threatened to sue Tata Sons and Tata Teleservices for mismanagement of the wireless telephony company. The Siva group owes Rs 700 crore to Tata Sons for buying back Tata Teleservices shares from NTT Docomo. The group was among sellers of Tata Teleservices shares in 2009 and had agreed to buy them back but defaulted last year. The amount is however provided for in the P&L.

Royale Partners Investment Fund Limited of Dubai, headed by H.E. Sultan Al Ahbabi has entered into an agreement with Sahara to provide loan of $1.6 billion against the security of 26% of the shares of Aamby Valley Ltd. They have committed through a mutual agreement and the agreement was submitted in the last hearing of the court (i.e. 10th August 2017). The same was raised in todays hearing as well.