The proposal was accompanied by projections indicating that the businesses are likely to continue reporting losses over the next three financial years, as the group continues to invest aggressively in building scale, customer acquisition, and market share, people familiar with the matter said. These losses could amount to ₹9,000 crore over the next three fiscal years, the people said.
The people cited by Moneycontrol said Tata raised questions about the assumptions underlying the proposal, particularly the growth projections used to justify the investment.According to people present during the discussions, the projections assumed annual revenue growth of around 45% over the next 3 years, even though current growth rates across parts of the digital portfolio are significantly lower.
Tata is understood to have questioned whether the assumptions were overly optimistic and whether the projected losses adequately reflected the risks associated with an increasingly competitive digital commerce landscape.
The issue assumes significance because Tata Digital has been one of the largest recipients of capital within the Tata Group over the past several years.
The people cited said that Tata was of the view that the group should prioritise among the new sectors it has entered in the recent past. Since Air India and the semiconductor business were projects of national importance, the group needed to call on the relevance of digital commerce.
“ Air India and semiconductors are projects of national importance. Do we really need to own Tata Cliq?,” said one of the people cited, referring to Tata Group’s e-commerce platform focused on apparel, footwear, beauty and lifestyle products. Launched in 2016, it is owned by Tata UniStore Limited and functions as a multi-brand online marketplace.
The business was created to bring together the group’s digital ambitions across commerce, grocery, loyalty, fintech and consumer engagement. Through acquisitions and investments, Tata Digital has assembled assets including BigBasket, Tata Cliq, Tata 1mg, Croma and the Tata Neu superapp platform.
However, despite substantial investments, profitability has remained elusive.
Tata Digital has been among the Tata Group’s most capital-intensive new bets. While the company narrowed its losses in FY25, several businesses within the portfolio continue to consume capital and face intense competitive pressures. BigBasket, Tata Cliq and Tata Neu continue to compete against deep-pocketed rivals, including Amazon, Flipkart, Reliance, Zepto, Blinkit and Swiggy Instamart. The people cited said that BigBasket’s market share had collapsed to around 7%, falling from a peak of nearly 40% in 2021.
The pressure has been particularly acute in quick commerce and online retail, where customer acquisition costs remain high, and profitability remains challenging. According to people familiar with the matter, concerns were raised during the meeting regarding whether fresh capital deployment can be justified based on aggressive growth assumptions when parts of the portfolio continue to struggle with scale, profitability and cash-flow discipline.
The group faces intense competition from well-funded rivals across e-commerce, quick commerce and consumer internet businesses.People familiar with the matter said concerns were raised at the meeting regarding the pace at which capital continues to be deployed into businesses that have yet to demonstrate a clear path to profitability.
The discussions are understood to have centred not only on the immediate funding proposal but also on whether the group’s digital investments are generating returns commensurate with the capital being committed.
Tata Sons’ Stakes
As of FY25, Tata Sons held stakes in 30 companies, comprising 14 listed entities and 16 unlisted companies. All 14 listed companies reported profits during the year.
The picture was considerably different among the unlisted businesses. Of the 16 unlisted companies, nine reported profits, highlighting the growing burden of loss-making and long-gestation investments within the group.
Air India was the largest loss-making unlisted company in the Tata portfolio, reporting a loss of ₹10,859 crore in FY25. Tata Sons began the process of acquiring Air India in 2019 and has since committed significant capital towards its turnaround and expansion.
People familiar with the matter said the financial performance of several unlisted businesses, including Air India and Tata Digital, has increasingly become a focus of discussions within the Tata Trusts ecosystem, particularly in the context of capital allocation and future funding requirements.
The debate comes at a time when governance and strategy discussions have intensified within Tata Trusts, the controlling shareholder of Tata Sons.
Moneycontrol has previously reported that Noel Tata has raised concerns regarding capital allocation and the performance of certain loss-making businesses within the group, including Air India and digital ventures.
The May 26 board meeting featured detailed presentations by business heads and chief executives of 3 Tata Group companies, Air India, Tata Electronics and Tata Digital, explaining the rationale for continued investments and the expected timelines for profitability.
People familiar with the matter said the discussions were largely cordial and no formal decisions were taken on leadership matters. However, the exchanges underscored growing differences over how aggressively Tata Sons should continue funding long-gestation businesses.
The issue is expected to figure prominently when trustees of Tata Trusts meet on June 8 and again when the Tata Sons board meets on June 12, where broader questions relating to governance, capital allocation and Tata Sons Chairman N Chandrasekaran’s future leadership are expected to come up for discussion.
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