Tata Sons' Unlisted Ventures See Mounting Losses, Raising Capital Allocation Concerns

Despite Tata Sons maintaining profitability for over a decade, its unlisted ventures, including Air India and Tata Digital, are grappling with escalating losses, raising concerns about capital allocation and the group's diversification strategy.

In a recent meeting concerning the third term for Natarajan Chandrasekaran as chairman of Tata Sons, Noel Tata, chairman of Tata Trusts, expressed concerns regarding capital allocation and the losses incurred by the group's unlisted and new ventures.

Tata Trusts holds approximately 66 per cent ownership in Tata Sons, the holding company of the diverse salt-to-software conglomerate.

Unlisted Ventures' Mounting Losses

An analysis of the latest Annual Report reveals that the combined net losses of Tata Sons' unlisted ventures, which include Air India, Tata Digital, Tata Electronics, Tata Teleservices, and Tata Projects, reached approximately Rs 25,568.8 crore in 2024-25 (FY25).

This represents a substantial 58.3 per cent increase from a net loss of around Rs 16,153 crore in the preceding year (FY24).

However, these combined net losses for unlisted subsidiaries in FY25 were lower than the record Rs 30,066 crore reported in FY23.

Despite these significant losses from its unlisted portfolio, Tata Sons itself has consistently posted a profit in each of the last 10 years.

Cumulatively, it has reported a consolidated net profit of approximately Rs 1.97 trillion during this period.

The unlisted ventures, as a collective, have been consistently reporting losses since FY16, the year Tata Sons began reporting consolidated finances.

Over the last decade, Tata Sons' unlisted ventures have collectively incurred net losses of around Rs 1.75 trillion.

Impact on Dividend Income and Borrowing

These growing losses coincide with a decline in Tata Sons' dividend income from the group's primary cash cow, Tata Consultancy Services (TCS), in FY25.

This marks the first such decline in over a decade.

Dividend payouts, including share buybacks by TCS, decreased by 5.4 per cent year-on-year (Y-o-Y) to approximately Rs 32,203 crore from a record high of Rs 34,053 crore in FY24.

This resulted in a 3.5 per cent Y-o-Y reduction in Tata Sons' dividend income (including proceeds from shares tendered in buybacks) from the group's listed companies in FY25, even with higher payouts from other major dividend contributors like Tata Steel, Tata Motors, and Titan Company.

Since FY16, TCS has accounted for a dominant 92 per cent of Tata Sons' dividend income from its listed companies, highlighting the disproportionate impact of India's largest information-technology services company on Tata Sons' overall earnings.

Other listed ventures such as Tata Motors, Tata Steel, Tata Power, and Titan Company are categorised as 'investments/associates' on Tata Sons' balance sheet due to the holding company owning less than 50 per cent in them.

Only the dividend income from these companies contributes to Tata Sons' consolidated profit and loss.

Dividends and proceeds from share buybacks remain the primary source of income for Tata Sons.

Business Standard calculations estimate that in FY25, Tata Sons earned equity dividends (including share buyback proceeds) worth approximately Rs 36,514 crore from the group's listed companies, compared to an all-time high of Rs 37,832 crore in FY24.

Top Loss-Making Unlisted Companies

Among the unlisted subsidiaries, Air India recorded the highest losses, followed by Tata Teleservices, Tata Teleservices (Maharashtra), Tata Electronics, and Tata Digital. Air India reported a net loss of approximately Rs 3,975.8 crore in FY25, with a sales turnover of Rs 61,080 crore.

The airline also showed a negative net worth of approximately Rs 18,070 crore and liabilities of Rs 94,005 crore at the end of FY25.

Tata Teleservices reported a net loss of approximately Rs 1,335 crore in FY25 on revenues of Rs 2,321 crore.

Tata Electronics and Tata Digital, meanwhile, reported net losses of approximately Rs 1,272 crore and Rs 998 crore, respectively.

In total, 31 out of the 100 subsidiaries listed in Tata Sons' Annual Report reported net losses on a standalone basis in FY25.

Tata International, led by Noel Tata, also reported consolidated net losses for the second consecutive year in FY25, with a net loss of approximately Rs 457 crore, up from Rs 313 crore a year earlier, despite a 13.6 per cent Y-o-Y increase in net sales to Rs 31,868 crore.

Unlisted Ventures Driving Top Line and Investment

Despite their losses, the unlisted ventures have become crucial revenue drivers for Tata Sons, even as TCS, historically the largest contributor to the holding company's consolidated profit & loss, has experienced a deceleration in its top-line growth.

The group's consolidated net sales increased by 25.6 per cent Y-o-Y in FY25 to an all-time high of approximately Rs 5.99 trillion from Rs 4.77 trillion in FY24.

The consolidated combined net sales of unlisted subsidiaries surged by 45.8 per cent Y-o-Y to approximately Rs 2.83 trillion in FY25 from Rs 1.94 trillion a year earlier.

The contribution of unlisted subsidiaries to the group's consolidated net sales reached a record high of 47.3 per cent in FY25, up from 40.7 per cent a year ago and 11.4 per cent in FY16.

These figures for unlisted subsidiaries were derived by subtracting the figures for TCS and the four listed companies from the consolidated total.

Among unlisted subsidiaries, Air India topped the charts in FY25, accounting for 13 per cent of the group's consolidated net sales, followed by Tata Electronics at 11 per cent.

In contrast, TCS's contribution to the group's consolidated net sales has steadily declined in recent years, falling to a record low of 42.6 per cent in FY25 from 50.5 per cent in FY24 and a high of 73.1 per cent in FY16.

TCS's consolidated net sales increased by 6 per cent Y-o-Y to approximately Rs 2.55 trillion in FY25 from Rs 2.41 trillion in FY24.

The persistent losses from unlisted ventures have led to a steady rise in the group's consolidated borrowing.

The group's consolidated gross borrowing increased by 27.5 per cent to approximately Rs 3.46 trillion in FY25, up from Rs 2.71 trillion a year earlier.

A significant portion of this increase in borrowing was attributed to Tata Capital, whose consolidated borrowing rose by 40.6 per cent to around Rs 2.09 trillion from approximately Rs 1.49 trillion at the end of March 2024.

Similarly, unlisted subsidiaries' gross debt increased by 10 per cent Y-o-Y to approximately Rs 1.14 trillion in FY25, compared to Rs 17,788 crore in FY16.

Strategic Investments in Unlisted Ventures

Tata Sons' balance sheet indicates that it is utilising dividend income from TCS and other listed companies to make equity investments in unlisted ventures and to fund their losses.

Since FY20, unlisted ventures have absorbed 84.2 per cent of all fresh equity investment by Tata Sons, with only 11.9 per cent directed towards listed ventures.

The remaining 4 per cent was used to fund the write-off value of Tata Sons' equity investment in loss-making ventures.

Consequently, unlisted ventures accounted for 60.2 per cent of Tata Sons' total equity investment in FY25, up from 49.3 per cent in FY24 and 37.2 per cent in FY16.

In FY25 alone, Tata Sons made a fresh equity investment worth approximately Rs 31,000 crore in its unlisted subsidiaries, marking the highest ever in a financial year.

Its cumulative equity investment in unlisted subsidiaries reached a record high of around Rs 1.02 trillion at the end of March 2025, up from Rs 71,298 crore at the end of March 2024.

Over the last five years, Tata Sons has cumulatively invested approximately Rs 71,781 crore in unlisted subsidiaries, with investment in unlisted ventures increasing at a compound annual growth rate (CAGR) of 27.4 per cent from Rs 30,521 crore at the end of FY20.

In contrast, Tata Sons made incremental equity investment worth just Rs 1,082 crore in its listed ventures in FY25.

Tata Digital Leads Investment Charts

Tata Digital, the group's e-commerce arm, emerged as the single-biggest investment for Tata Sons in FY25, surpassing Tata Motors, which has historically been the largest.

Tata Sons has now cumulatively invested approximately Rs 22,903 crore in equity in Tata Digital, compared to its cumulative equity investment of Rs 22,657 crore in Tata Motors.

Tata Digital first appeared on Tata Sons' balance sheet in FY21 with a total equity investment of about Rs 600 crore.

Air India is now the third-biggest equity investment, valued at approximately Rs 22,618 crore at the end of FY25.

Other significant investments by Tata Sons include Tata Electronics (Rs 6,961 crore) and Tata Realty & Infrastructure (Rs 5,370 crore).

These diversification efforts have significantly transformed Tata Sons' business operations at consolidated levels.

In FY16, IT services & consultancy (primarily TCS) accounted for 71 per cent of Tata Sons' consolidated revenues.

Its share has since decreased to 43 per cent in FY25, with nearly a quarter now contributed by airlines and electronic manufacturing, sectors that were not present in FY16.