High on e-play, Tatas need to refuel aviation business


MUMBAI: The 18 billion rupee deal Tata Sons won in Air India is just the beginning of their aviation spending. It will have to allocate more resources to sustain aviation even as it makes ambitious moves in the digital, high-tech manufacturing and healthcare sectors. The company’s balance sheet is set to increasingly reflect investments in emerging businesses as it seeks to capitalize on growth opportunities and aims to turn at least one of them into a cash-spitting machine like TCS. The top software services company is the largest contributor (over 85%) to Tata Sons’ revenue.
However, money will not be an issue for Tata Sons as it enjoys the current steel recovery cycle, TCS ‘consistent performance, and impressive market capitalization growth of its operating companies. The market value of its investments is over Rs 12 lakh crore against its debt of Rs 25,396 crore, putting Tata Sons in a comfortable position. This also allows you to raise capital by monetizing your investments.

Recently, the holding company of the Tata Group you have spent considerable amounts to buy BigBasket, 1MG and Texas Networks, among others, and plans to spend more to beat the competition. Some Tata Sons trackers, however, have reservations and feel that aviation, known for being a capital-intensive, money-losing company, could bring down the salt-to-software conglomerate. Internally, Bombay House, the Tata Group’s Mumbai headquarters, 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 level. The existing airline startups of Tata Sons, AirAsia India and Vistara, in which it has invested over Rs 6 billion since inception, have lost more than Rs 9 billion to date.
Tata Sons may have to shell out money equivalent to its Air India offer to restructure the airline, which will be the second-largest purchase under the Tata Sons chairman. N Chandrasekaran. But, noted one industry person, “a lean cost structure is key to being successful in aviation.”

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