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TATA Group (TCS) May Collapse

Last updated: March 18 2009
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  • TATA Group (TCS) May Collapse

    Tatas' debt to cross Rs 1-trillion mark; still manageable
    16 Mar 2009, 1432 hrs IST, PT

    NEW DELHI: Tata group's total debt is set to exceed Rs 1,00,000 crore in the current fiscal, but it appears comfortable on the liquidity front, a

    report has said.

    "We expect the total debt of the Tata group as of the end of FY'09 (ending this month) at over Rs one trillion, of which Rs 117 billion is due through March 2010," analysts at domestic brokerage unit of financial major Kotak group said.

    When contacted, Tata Sons spokesperson told reporters, "We are not in a position to comment on such reports. As you are aware Tata Sons does not aggregate the debt of individual group companies as each company is a standalone legal entity and is evaluated accordingly."

    Increase of more than Rs 30,000 crore in group's overall outstanding debt position from year-ago level of about Rs 70,000 crore is primarily due to its aggressive capital expenditure plans and past acquisitions, the report stated.

    Analysts, however, noted that Tatas' funding challenges are manageable and debt obligations could be met through free cash flow generated at various group companies and proceeds from the stake sale by holding company Tata Sons.

    "We believe the group's liquidity position is comfortable at an aggregate level," Kotak Institutional Equities Research analysts said, adding that possible fund-raising options include monetising Tata Motors' commercial vehicle division and stake sale by Tata Sons in TCS and Tata Tele Services.

    "We believe the Tata Group of companies (represented by five largest listed entities) would generate Rs 10,000 crore in free cash flows in FY2010, against Rs 11,700 crore in debt coming due for repayment/refinance, implying a funding gap of Rs 1,700 crore," the report noted.

    Total debt of these five entities -- Tata Motors, Tata Steel, TCS, Tata Power and Tata Communications -- which account for 90 per cent of the group's revenues, is estimated at Rs 91,000 crore in FY2010, the analysts said.

    This would include Rs 40,600 crore from Tata Steel, Rs 22,800 crore from Tata Motors, Rs 21,400 crore from Tata Power and Rs 6,200 crore from Tata Communications.

    "Within the group, the most pertinent issue remains Tata Motors' Rs 11,300 crore debt coming up for repayment/refinance in FY2010," the analysts said. Tata Motors needs to refinance $2 billion (Rs 10,000 crore) of its $3 billion one-year bridge loan coming due in June 2009, while another Rs 1,300 crore debt is coming due in its books.

    To meet group's funding needs, the report said, Tata Sons has the financial flexibility to support group companies in extreme cases like clampdown in the debt markets and its options include stake sale in group companies.

    Tata Sons might also be required to infuse fresh equity into one or more group companies, such as Tata Motors and Tata Steel, in case of a sharp

    deterioration in operational and financial conditions.

    "Worse and prolonged decline in global demand environment would require some tough decisions regarding restructuring of the group itself, asset sales and reorganisation within companies," the report said.

    For instance, a decision might have to be taken if Tata Motors needs to be in both the passenger car and commercial vehicle businesses, it added.

    For Tata Sons, analysts said, stake sale remains primary option. "Tata Sons has a 33 per cent stake in TTSL and in our view most suitable course of action would be to exit the firm," adding it could fetch $3 billion (Rs 15,000 crore).

    Besides, Tata Sons has a 74 per cent stake in TCS, out of which a 25 per cent could be sold, but divestment has limited merit at current valuations. "While a strategic er may not be interested in a non-controlling stake, a financial er could pay 10 per cent premium to current market price", wherein Tata Sons could get $2.5 billion (Rs 12,500 crore).

    Analysts said Tata Motors could monetise its commercial vehicle division, valued at Rs 12,000 crore, through measures like stake sale or spin-off.

    Besides, Tata Motors can borrow up to Rs 11,500 crore against assets in its books and sell some subsidiaries.

    "Tata Motors' stake in Tata Motors Daewoo could fetch $180 million (Rs 900 crore) ... stakes in Tata Construction and Tata Technologies could fetch up to $200-300 million (Rs 1,000 crore to Rs 1,500 crore)," they added

    ==========================================

    Though they say it ia manageable, it looks like TATA group may collapse at any time. Its debts are 90% of its revenue.

    That means, TCS another IT company may also collapse which will lead to another fall in real estate prices as chain effect
  • #2

    #2

    Re : TATA Group (TCS) May Collapse

    The level of panic that Bears can create is demonstrated in the above STUPID interpretation by the great IDIOT who mimics my name.
    I just hope for once he is right and TCS does collapse in which case we will have the first example of a really great collapse in India.
    Unfortunately as usual it wont happen! What a pity.

    Comment

    • #3

      #3

      Re : TATA Group (TCS) May Collapse

      TCS Ltd is one of the most stable company with track record as a best employer, consistent performer, ..... and many other attributes. TCS is one of the few companies which keeps focused to work culture, ethics and have a strong base. Unlike other profitable companies like IOC, ONGC, to name a few who waste money in distributing unethically among its employees and other
      miscellaneous things, TCS has used it wisely over the years to built its reputation, assets and extended its business.
      The share prices tells itself what emotional belief do Indians have for TCS. Thus the news above is only a negative thought cleverly put before public to market the media.
      By the by, I would like to know from where (news agency or print media) did Mr ="http://www.indianrealestateforum.com/members/nataraajg007-16703.html"]Nataraajg007[/URL] get the clipings, and the date?
      udayan.giri
      trustedproperty

      Comment

      • #4

        #4

        Re : TATA Group (TCS) May Collapse

        Say something useful for a change ...

        Originally posted by Natarajg007 View Post
        The level of panic that Bears can create is demonstrated in the above STUPID interpretation by the great IDIOT who mimics my name.
        I just hope for once he is right and TCS does collapse in which case we will have the first example of a really great collapse in India.
        Unfortunately as usual it wont happen! What a pity.

        As usual, Nats is at his best spouting off his trademark language about others but ending up saying nothing at all in so many bad words!!!

        Nats, even if the other person is wrong, at least he is raising a pertinent point about the excessively high leverage of the Group (never mind how much they are allowed to borrow by current rigged up rules).

        You, as usual say nothing in so many words. Grow up!!!

        cheers

        Comment

        • #5

          #5

          Re : TATA Group (TCS) May Collapse

          Originally posted by Natarajg007 View Post
          The level of panic that Bears can create is demonstrated in the above STUPID interpretation by the great IDIOT who mimics my name.
          I just hope for once he is right and TCS does collapse in which case we will have the first example of a really great collapse in India.
          Unfortunately as usual it wont happen! What a pity.
          Many experts were telling so many big companies in US will not collapse.

          But what happened!!

          Who predicted Satyam will collapse some 3 months ago?

          Now situation , every one knows.

          Comment

          • #6

            #6

            Re : TATA Group (TCS) May Collapse

            Originally posted by udayan.giri View Post
            TCS Ltd is one of the most stable company with track record as a best employer, consistent performer, ..... and many other attributes. TCS is one of the few companies which keeps focused to work culture, ethics and have a strong base. Unlike other profitable companies like IOC, ONGC, to name a few who waste money in distributing unethically among its employees and other
            miscellaneous things, TCS has used it wisely over the years to built its reputation, assets and extended its business.
            The share prices tells itself what emotional belief do Indians have for TCS. Thus the news above is only a negative thought cleverly put before public to market the media.
            By the by, I would like to know from where (news agency or print media) did Mr ="http://www.indianrealestateforum.com/members/nataraajg007-16703.html"]Nataraajg007[/URL] get the clipings, and the date?
            Dont worry Udaya Giri, there are guys like Nataraaaaj and Wiseman who will sell bad news even from their own imagination. That does not mean TCS will collapse. Neither did these fellows ever come close to understanding why Lehmann collapsed.
            They are just timepassers who hoot bear news since they are paid Rs 15 per post to make Chennai realestate look worthless.
            Dont worry, if TCS fails then even the RBI can fail and we can become Somalia or Zimbabwe!

            Comment

            • #7

              #7

              Re : TATA Group (TCS) May Collapse

              Originally posted by udayan.giri View Post
              TCS Ltd is one of the most stable company with track record as a best employer, consistent performer, ..... and many other attributes. TCS is one of the few companies which keeps focused to work culture, ethics and have a strong base. Unlike other profitable companies like IOC, ONGC, to name a few who waste money in distributing unethically among its employees and other
              miscellaneous things, TCS has used it wisely over the years to built its reputation, assets and extended its business.
              The share prices tells itself what emotional belief do Indians have for TCS. Thus the news above is only a negative thought cleverly put before public to market the media.
              By the by, I would like to know from where (news agency or print media) did Mr ="http://www.indianrealestateforum.com/members/nataraajg007-16703.html"]Nataraajg007[/url] get the clipings, and the date?
              Since this article has appeared in the Times of India (dated 16th March,2009; the link is:]http://timesofindia.indiatimes.com/articleshow/msid-4271918,prtpage-1.cms[/url]), it can not be merely ignored.
              What I can understand is that this is simply the tip of an iceberg!

              Chennai Jagan

              Comment

              • #8

                #8

                Re : TATA Group (TCS) May Collapse

                TCS Is a very stable company, I dont think TCS is showing any signs of collapsing. Even companies like sathyam even after all the scandal is able to survive, TCS seems extremely stable. If companies like Tatamotors (or) TVS (or) other auto/spare part related group of companies start to fall there wont be an economic break down but rather a crash down back to the stone ages. TCS has very stable orders and has a very strong financial power enabling to withstand even the worst of droughts.

                Comment

                • #9

                  #9

                  Re : TATA Group (TCS) May Collapse

                  I also wish the same.

                  But who knows which egg is in which basket

                  Comment

                  • #10

                    #10

                    Re : TATA Group (TCS) May Collapse

                    Originally posted by Nataraajg007 View Post
                    I also wish the same.

                    But who knows which egg is in which basket
                    Dear friend

                    Have a look at this thread and you will find bad egg is in TATA's bag.

                    ]http://economictimes.indiatimes.com/Features/Nano/Little-Nano-carries-a-big-burden-for-Tata/articleshow/4281264.cms[/URL]

                    Thanks

                    chataara

                    Comment

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