Ratan Tata, Tata Group’s patriarch, dies aged 86

MUMBAI, INDIA — Ratan Tata, the visionary former chairman of Tata Sons, passed away at the age of 86 in Mumbai. 

His leadership transformed Tata Group into a global conglomerate, with Tata Consultancy Services (TCS) playing a crucial role in this expansion. 

N Chandrasekaran, current chairman of Tata Sons, described Tata as a “friend, mentor, and guide,” highlighting his profound impact on the group.

How TCS powered Ratan Tata’s global vision

Under Ratan Tata’s leadership, Tata Consultancy Services (TCS) became a crucial financial pillar for the Tata Group. The company’s initial public offering in 2004 raised approximately ₹2,800 crore ($333 million) for Tata Sons. 

This capital infusion allowed TCS to indirectly support Tata Sons’ significant investments in key group companies as they expanded globally.

This financial leverage facilitated total investments of ₹34,000 crore ($4.04 billion) across various group companies between 2004 and 2012.

During this period, Tata Sons received approximately ₹10,000 crore ($1.19 billion) in dividends from TCS. Additionally, the sale of TCS shares, including those from the IPO, generated another ₹9,100 crore ($1.08 billion).

Furthermore, Tata Sons secured an additional ₹11,500 crore ($1.36 billion) through borrowings largely backed by pledging shares of TCS, which is the group’s most valuable asset.

Beyond investments, TCS’s financial contributions allowed Tata Group to invest in emerging sectors such as renewable energy and electric vehicles. These investments diversified the group’s portfolio and positioned it for future growth. 

TCS also played a key role in modernizing India’s IT infrastructure through projects like Passport Seva Kendras (PSKs) and developing core banking platforms for major Indian banks.

Ratan Tata’s legacy endures through TCS’s ongoing success and its vital role in supporting Tata Group’s global endeavors.

TCS Q2FY25 results: Navigating challenges

Following the news of Ratan Tata’s passing, TCS released its financial results for Q2FY25. In its recent report, the firm highlighted a net profit of ₹11,909 crore ($1.42 billion), which marks a 5% increase from the previous year.

Revenue also grew 7.6% year over year to ₹64,259 crore ($7.67 billion). Despite these gains, performance was affected by global geopolitical uncertainties and cautious client spending. 

The total contract value (TCV) for new deals reached $8.6 billion, down from $11.2 billion in Q2FY24.

K Krithivasan, CEO and MD of TCS, noted that while growth markets continue to expand, the demand environment remains cautious. 

“Overall, clients continue to prioritize cost efficiency through transformation, and demand for discretionary deals with low immediate return on investment remains relatively low,” he stated.

However, he added that spending increased within the banking, financial services, and insurance (BFSI) sectors.

Regionally, TCS experienced robust domestic growth driven by significant deals like the Bharat Sanchar Nigam Limited (BSNL) contract. While North America saw a slight decline, other regions such as the Middle East & Africa and Asia-Pacific showed positive growth.

Strategic investments and future outlook

TCS continues to invest strategically in talent and infrastructure to sustain long-term growth. During the quarter, the company added 5,762 employees and saw increased adoption of Generative AI solutions. 

CFO Samir Seksaria highlighted disciplined execution leading to strong cash conversion despite margin contractions due to strategic spending.

“Our longer-term cost structures remain unchanged, and we remain confident in our ability to continue delivering industry-leading profitable growth,” he added.

Looking ahead, analysts like Biswajit Maity, Gartner’s senior principal analyst, remain optimistic about TCS’s growth trajectory. 

“Based on insights from Gartner’s Forecast Analysis on Global IT Spending and TCS’s solid business pipeline, we are confident that TCS will continue its growth trajectory in the coming quarters,” he stated.

With its alignment with market expectations and clients’ digital transformation goals, TCS is poised to maintain its position as a strategic partner in the IT services sector.