The Economist has done something the Indian media may not have done as yet. An article in the magazine has taken a detailed look at the duds, indedted businesses of the Tata group.
According to the article, overall performance of Tata Sons, the group’s holding company with 182 subsidiaries, is “murky” as it need not publish accounts on a “consolidated” basis since it is unlisted.
The article has taken into consideration results of the “14 biggest operating companies (excluding Tata’s financial operations)” which “appear to account for about 95% of the group’s sales”. According to the article, the sums are “a guide”, as it involved “some guesswork”.
It is in effect taking a look at what is in store for Mistry once he takes over as chairman.
Good news for him is that “overall profitability is passable, with a 10% post-tax return on its $58 billion of capital employed”.
And the bad news? “…Much of the group is in poor shape”, thanks to Tata Steel, whose European operations have been rated junk by rating agencies. The telecoms business is “the biggest stinker” and hotels “less comfortable for bean-counters than for guests”.
After 1990s, the group’s discipline slipped “as a recent burst of dealmaking has highlighted”. The ambition for more deals continues unabated, as is visible in Indian Hotels Company’s bid for Orient Express.
However, there are hopes that Mistry “will shake things up” as, unlike Tata, he has a “fortune at stake through his family’s holding in Tata Sons”.
Read the full story here.