Tatas set to review business plan

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Jun 4, 2020

Reeba Zachariah | TNN
Mumbai: The board of Tata Sons is scheduled to meet on June 5 to chart the next move for the $111-billion salt-to-software group whose businesses have been significantly impacted due to the pandemic.
The business scenario has undergone a drastic change since the board members met last time in March to consider commitments for Covid-19 treatments. Many of the group’s portfolios — including automotive, steel, construction, lifestyle retail, hospitality and aviation — have taken a big hit due to business restrictions in India and elsewhere, triggered by the coronavirus pandemic.
Tata Sons, among other things, will relook at its strategies covering a fund-raise, budget allocation to portfolio companies, debt leverage as well as revenue generation. It will also consider the compensation of its executive leadership, including chairman N Chandrasekaran, for fiscal 2021. For fiscal 2019 (figures for FY20 are yet to be released), Chandrasekaran took home a remuneration of Rs 66 crore, which included a Rs 54-crore commission on Tata Sons’ profit. The earnings will be revised as Tata Sons battles lower revenues because of the Covid pandemic.
The revenue of the holding company of the Tata Group mainly comprises dividend income and brand royalty fees. But, with its portfolio companies facing demand challenges even as business restrictions are eased in several countries, board members will be relooking at expenses.
The health crisis will shrink the global economy by 3.2% this year and could contract by a further 0.5% in 2021 if infection cases and business restrictions continue till September 30, according to the United Nations. The Tata Group earns more than half of its revenues from outside of India. TCS, Jaguar Land Rover (JLR), Tata Steel Europe (TSE) and Tetley are significant contributors to the conglomerate’s international revenues.
TCS, the most profitable company within the Tata Group, sees short-term business challenges due to the pandemic. But it expects to gain business later as clients would invest more in technology after the world emerges from the crisis. On the other hand, JLR and TSE have sought financial support from the UK government to weather the collapse in sales brought on by the Covid outbreak. Several Tata companies have been preserving cash and bolstering liquidity, besides reducing costs as they align themselves with the market situation.
The board of Tata Sons will also discuss financial requirements for certain existing portfolios like aviation and financial services and for building new businesses. Tata Sons has recently registered an entity to manufacture ventilators and personal protective equipment (PPE), among other medical equipment and devices. The move follows its extensive work with the government to tackle the Covid situation. Tata Sons had announced a contribution of Rs 1,000 crore towards Covid activities.

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