MUMBAI: The revenue that Tata Consultancy Services generated from Tata Group companies increased by only 3.5% in fiscal year 2020, compared to a double-digit rise in the previous financial year, according to the company’s annual report.
Revenue from Tata Sons as well as subsidiaries and associates grew to nearly Rs 2,656 crore compared to a more than 13% growth to Rs 2,566 crore in financial year 2019, when the software services exporter capitalised on the group’s new technology initiatives.
The pace of revenue growth has slowed even as N Chandrasekaran, the chairman of Tata Sons, has sought more collaboration between group companies since his appointment in 2017.
During TCS’ previous Annual General Meeting, a shareholder, who had noted that revenue from group companies had increased in 2018-19, asked whether the margins in contracts awarded by group companies was higher and whether there would be a further increase in revenue from Tata Group companies in 2019-20.
Responding , Chandrasekaran had said that all business “between Tata Group companies are done at arm’s length, on a very transparent basis, but I would like to see more and more Tata companies working together…I’m glad to see some improvement, but we need to go a long way.”
According to a Tata Sons executive, group companies had invested heavily in new technology transformations last year which were headed by TCS, some of which are still underway.
“Large scale technology transformations have been happening at group companies like Tata Steel and Tata Motors, which signifies the increase in 2019. Some of these technology initiatives are still in progress at these large companies. That’s the reason why in 2020 the growth percentage seems relatively small. But group companies continue to invest in new technology,” the executive who is aware of the developments said.
TCS and Tata Sons did not respond to emails seeking comment.
Analysts said TCS’ revenue contribution from government contracts has seen sharper growth as the software services provider increased revenue contribution from the public sector.
TCS though does not disclose its revenue contribution from government contracts.
Even if TCS grows its revenue contribution from its parent group, they said the overall percentage contribution would remain negligible due to the sheer scale of the software exporter.
“Even if TCS wants to increase its revenue contribution from Tata Sons, it would happen at the proper arm’s length pricing and it would not be significant due to its size. For a company of the size of Tata Elxsi, the contribution may instead be material,” said Madhu Babu, senior technology analyst at brokerage firm Centrum.