But this is not the first time that such doubts have surfaced. During 1992-93, the net profits of Telco, Tisco and Tata Chemicals plummetted to Rs 30.04 crore, Rs 127.12 crore and Rs 74.95 crore. But their bottomlines recovered to Rs 101.75 crore, Rs 180.84 crore and Rs 215.08 crore in 1993-94. Will these companies bounce back again?

There is a process of introspection and restructuring going on within the group, clearly evidenced by chairman Ratan Tata's scathing comments on the Telco management. The weight of evidence appears to suggest that, with the restructuring under way, the group can bounce back once the economic slump is over.

Right now, however, there is cause for worry. The Tata companies haveseverely underperformed the BSE sensitive index. The market capitalisation of Tisco, Telco, Tata Chemicals and Tata Power have eroded by 325 per cent, 339 per cent, 440 per cent and 153 per cent in the first six months of the calendar year 1998. Of course, not all is gloom and doom. Tata Consultancy Services (TCS) has cashed in on the software boom, registering a 50 per cent growth in turnover to Rs 1,083.63 crore during 1997-98, and will no doubt continue to improve. Trouble is, TCS is part of Tata Sons, which is privately held. We look below at some of the other group companies.

Telco: At the start of the decade, Telco was mainly manufacturing most of its components, which translated into higher fixed costs. This strategy led to higher contributions when volumes were high and huge losses when volumes were low. Learning from past mistakes, Telco has started outsourcing its components, leading to reduced volume-elasticity of its profits and made profits more correlated to realisations. The company'scurrent plight can be easily attributed to the poor business conditions plaguing the commercial vehicle segment.

In 1997-98, the company's sales in the (M/HCV) and LCV segment was 42 per cent and 27 per cent lower than in 1996-97 respectively. Even in the first quarter of the current year, unit sales have dipped by 40.7 per cent to 23,601 units. The situation seems to have been salvaged to some extent by the high-margin utility vehicles, namely the Sumo and the Safari. But Safari has competition waiting in the wings with the Toyota-Kirloskar combine and Mitsubishi with its Pajero model slated to enter the sports utility vehicle segment. Moreover, Telco has already invested four years of R&D and around Rs 300 crore in the Safari project. Also, its Mint (small car) project costing about Rs 1,700 crore with a breakeven of 60,000 cars per year, will have to compete with Hyundai and Daewoo. Any revival will be closely linked to market acceptability of its small car. If the project were to be successful, Telcowill have to garner 25 per cent of the car market by the turn of the century. Even then the small car might contribute only 30 per cent to its turnover in two years' time. The crucial imponderable for Telco is the success of Mint, which will make or break the company. But with the small-car market growing by leaps and bounds, Telco is perhaps the only domestic company which can give Maruti a run for its money. All that is required is good pricing and value-for-money, which Telco trucks have been giving for decades. The odds are that Telco will pull it off.

Tisco: Tisco's performance has been largely hampered by recession in the steel industry and impact of cheap imports. International prices have been on a steady decline by around 25 to 30 per cent, significantly eroding margins. Its allied units like bearings, steel tubes and ferro alloys have performed abysmally. The bearings segment has been hit by imports, the steel-tube division by lower domestic demand and ferro-alloys division by decreasedoverseas demand. The CIS countries have been repeatedly dumping coils as duties have been below WTO norms. Even in the hot-rolled (HR) coil segment the company has had to contend with competition from Essar and Lloyds. Its Gopalpur project is fraught with uncertainty.

Any revival in Tisco's fortunes is closely linked to a change in its product mix, with higher value addition. It is slated to double the capacity in HR coils in the current year and cold-rolled products at the turn of the century. Once its HR-plant expansion goes on stream, value addition will soar, say, from Rs 200 to Rs 2,000 per tonne. But it has to be noted that phase-IV of its modernisation plan is slightly off target, and quicker completion of the same will help revive its sagging fortunes. But the change of focus to value addition should see the company weather the next downturn in the economy more easily.

Tata Chemicals: Tata Chemicals ventured into the manufacture of urea as ammonia and carbon dioxide, used for manufacturingsoda ash, are also common for urea. Moreover, its foray into cement is justified as it utilises waste materials like limestone, flyash and captively-produced gypsum to produce portland cement, which is marketed by ACC. Of late, the fertiliser business has been contributing almost 65 per cent to the net profits whilst the chemicals business contributes the rest. This was because the company was unable to sell urea produced over the stipulated norm of 115 per cent set by the government in the second half of the previous fiscal. The roll-back of the urea price hike will help the company as offtake will improve. The chemical division is expected to perform better in the second half as soda-ash prices are expected to improve. During 1997-98, Tata Chemicals posted a sales turnover of Rs 1,648.35 crore and net profits of Rs 288.55 crore, while during 1996-97 it posted Rs 1,598.52-crore sales turnover and Rs 240.58-crore net profit. This proves that the company continues to be relatively insulated from the economicdownturn.

Tata Electric Companies (TEC): TEC -- the troika of Tata Power, Andhra Valley and Tata Hydro sharing all income and expenses (except depreciation) in the ratio of 5:3:2--has been mainly affected by lower supplies to one of its main clients--BSES, which has created its own generating capacity. In 1997-98, BSES accounted for 33 per cent of units sold by TEC compared with 38 percent in 1996-97. But of late, TEC has been plagued by stagnant demand in the licensed area. It has been trying to get the industrial belt as the licensed area for its proposed 450mw Bhivpuri unit for more than two years. MSEB, however, for obvious reasons is willing to give only the agricultural belt which is not acceptable to TEC. To overcome this, the company has opted for the IPP route by acquiring Tisco's 67.5mw Jojobera power plant. It is also trying to get Bandra-Kurla area as its licensed area. An IPP earns 16 per cent post-tax return on PLF of 68.5 per cent and for higher PLF, incentive is given. The incentiveor PLF at which Jojobera operated has not been specified by TEC. A look at the financials for 1997-98 reveals that even at 68.5 per cent PLF, Jojobera (the Tisco power unit that TEC purchased some time back) will account for almost 4 percent of units sold. For Jojobera, TEC is looking at the industrial belt (where realisation are higher as compared to residential) as the licensed area. Also MSEB hiking its demand charge could be a problem, as margins of TEC will be squeezed. Moreover, to fuel growth, TEC has opted for IPP route. Since returns are linked to the PLF, the IPP's will show a growth only for 3-4 years.

To put it in a nutshell any economic revival in TEC is linked to solving the pecularities of the licensing regime.

The other companies in the Tata stable, such as ACC (although there is some controversy about whether it is part of the group) and Indian Hotels should have no difficulty in bouncing back when the good times come back. Tata Tea follows a different cycle. Its fortunes will movecyclically with the tea industry. But companies such as Telco, Tata Chemicals and Tata Tea continue to be major players in their respective industries. Even Tata Steel, saddled with a huge labour force and uneconomic investments in townships and other social programmes, can become competitive provided it restructures. The Tatas have a lot to lose--for them its not just a matter of keeping their heads above water, but of retaining their blue chip status. What they need is not only good managers, which they have in plenty, but entrepreneurial flair.