Tatas on a Binge Buying with a Big Basket
“Mr JRD Tata would have been overjoyed if he was in our midst today,” Ratan Tata, chairman emeritus, Tata group was quoted in the media, announcing the Tata group’s Rs18,000 crore winning bid to regain Air India after a hiatus of 68 years.
 
JRD Tata would have been a ripe old soul of 117 years had he, impossibly, lived to see this day!
 
Quite understandably, Mr Jeh Tata would have felt a deep sense of disappointment when the airline he founded in 1932 as a division of Tata Sons was nationalised 21 years later, and most likely, deeply hurt when he was removed suddenly as the chairman of the airline in 1978.
 
It is unclear whether he had expressed a wish on his death bed to reacquire the airline whenever it would be privatised. While his emotional attachment to an airline he founded, given his passion for flying, was irreproachable, it would be an underestimation of his acumen to believe that in the current economic environment he would have wished to part with, not an inconsiderable sum for anyone, much less the debt-laden Tata group, to acquire a business, which historically has made millionaires out of billionaires!
 
Thanks to the cash machine called Tata Consultancy Services (TCS), the group is holding its head high, which at the last count in the year ended March 2021 spewed out hard currency of almost Rs39,000 crore. This can only get better in the current wave of digitisation and embarrass the finance head, who may not know where to safe keep so much money. He should be thanking his chairman emeritus, who is finding innovative ways to relieve him of his burden!
 
Tata group has existing investments in two airlines, Air Asia and Vistara. While there is no published financial data on these, it can be said with no fear of being proved wrong that they are guzzling cash by the minute!
 
Singapore Airlines, which passes off as perhaps the most revered brand in the airline business globally, had a wafer-thin profit of about $0.7 billion in 2019 on revenues of $16 billion, a flattering ratio under 5%! This was pre-COVID-19!
 
The only profitable airline in India presently is apparently making its money out of cancellation charges as little is refunded to passengers when they cancel the tickets! A very unique business model. Why entrepreneurs enter the airline business is for psychologists to figure out! One does hear of commissions on the purchase of aircraft that is safely parked in offshore havens.
 
Tata Sons is predominantly helped by public charitable trusts. The highest court called upon to decide on the promoter dispute held that the unique ownership pattern of the company makes it accountable to powers beyond the immediate statutory board and effectively to the trustees of the Tata trusts that own the shares.
 
The trustees of the trusts are supposed to be performing a solemn public trust function of making sure the wealth is preserved and enhanced for the benefit of the public at large and subserve the objectives of the two trusts. The chairman emeritus of the group is a trustee. He is over the moon on this buy of Air India. It will be necessary for him to explain what business plan exists for Air India’s revival and how the group will recover its investment.
 
“Tata will have the opportunity of regaining the image and reputation it enjoyed in the earlier years,” is another quote of the chairman emeritus. Perhaps the best way to achieve this is to avoid the fallacy of grandeur and go back to the drawing board to make the existing businesses far more profitable!
 
(The author is a CA and CS and retired as a partner at EY, Chennai, heading tax and regulatory advice. Views expressed are personal.)
 
Comments
saharaaj
3 months ago
With Tata Entry in retail big basket be renamed as TATA BASKET
kbswamy
3 months ago
What's wrong with this author and MoneyLife for publishing such a stupid article? Something to do with anti-Tata inclinations of the publisher??
Shivram_R
3 months ago
Wow!! Very hard hitting!! “Regain image and reputation” and no mention of “adding shareholder value”, perhaps because there is none to add.
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