Strong in e-play, Tatas must supply its aeronautical activity

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The Rs 18,000 crore bid that Tata Sons won Air India for is just the start of its aviation spending. It will need to allocate more resources to support aviation even as it takes ambitious steps in the digital, high-tech manufacturing and healthcare sectors. Although the company’s traditional activities do not need capital, except for a few, its balance sheet should increasingly reflect investments in emerging companies as it seeks to capitalize on opportunities for growth. growth and aims to make at least one of them a money-spitting machine like TCS. The software services major, which split as a separate entity in fiscal 2005, contributes the most (over 85%) to Tata Sons revenues.
Money will not be an issue with Tata Sons to fund acquisitions and invest in companies, however, as it benefits from the current cycle of steel rising, TCS’s consistent performance and impressive market capitalization growth of its operating companies. The market value of its investments exceeds Rs 12 lakh crore compared to its debt of Rs 25,396 crore, placing Tata Sons in a comfortable position. It also allows her to raise capital by monetizing her investments, which she does whenever necessary.
“Telecoms (Tata Teleservices) have been a thorn in Tata Sons’ bouquet for the past few years, but it has been fixed. Stakes have been increased in existing companies (such as Tata Communications and Tata Chemicals) and Tata Sons is now in a comfortable position. In addition, growth capital has been injected into units (such as Tata Power and Tata Motors) to deleverage their balance sheets. It will not be a problem to inject more funds into aviation and other new businesses to support and accelerate their growth, ”said a person familiar with the movements of Tata Sons.
Recently, the Tata group’s holding company has spent a considerable amount of money to buy BigBasket, 1MG and Tejas Networks, among others, and plans to spend more to fight competition. Some Tata Sons trackers, however, have reservations and believe that aviation, known to be a power-hungry and money-losing business, could bring the software salt conglomerate down. Internally, Bombay House, the Tata group’s headquarters in Mumbai, has estimated that the company will not make a profit for five years until 2025, when global passenger traffic is expected to return to pre-Covid levels. Tata Sons’ existing airline startups – AirAsia India and Vistara, in which it has invested more than Rs 6,000 crore since the start of operations – have lost over Rs 9,000 crore to date. The aviation industry has been hit by high operating costs and corruption scandals at AirAsia India, among other factors. Air India’s story is also not in Tata Sons’ favor – the carrier has not been profitable for the past 14 years.
Although Tata Sons cannot invest expansion capital in AirAsia India, as its Malaysian partner is already on detachment from the low cost carrier, it will deploy additional funds in full-service actor Vistara, which has Singapore. Airlines as promoter. It may also have to fork out the equivalent of its Air India bid to restructure the carrier, which will be Tata Sons chairman N Chandrasekaran’s second biggest purchase after Bhushan Steel. But, pointed out an industry person, “A lean cost structure is the key to success in aviation.”

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