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For Tatas, Chandra’s 5th year at the helm may be best yet

Nandana James Forum Gandhi Mumbai | Updated on February 21, 2021

N Chandrasekaran   -  PAUL NORONHA

Out of over ₹8.6-lakh cr market cap added over 4 years, 85% has come from TCS, Tata Motors, Tata Steel and Titan

When N Chandrasekaran took charge of Tata Sons in 2017, he had spelt out three broad areas of focus — bringing the group closer together under ‘One Tata’ strategy, driving operating performances, and enabling greater rigour to capital allocation policies. Four years on, Chandra has laid the foundation for Tata group’s next phase of growth with a number of big-ticket moves including the rollout of its e-commerce super-app platform, a big thrust to the electric vehicle segment, healthcare, and high-tech manufacturing.

Rukshad Davar, Partner & Head - M&A Practice Group, Majmudar & Partners said that while the efforts continue on simplification of the Tata group structure, reorganising businesses from a profitability standpoint, and creating new emerging businesses, Chandra continues to uphold and reinforce within the organisation the fundamental principles of the Tata Group like trust, transparency and integrity.

Tata companies have added over ₹8.6-lakh crore in market capitalisation in the last four years. However, nearly 85 per cent of this continues to come from four entities- TCS, Tata Motors, Tata Steel, and Titan.

Weak link

One of the major decisions taken by Chandra was to reduce the number of subsidiaries of Tata Steel and debt levels. Tata Steel has managed to reduce direct and indirect subsidiaries to 182 from 292. But its of over ₹1-lakh crore largely due to the bleeding European operations is a concern. Tata Steel has also renewed its focus on value-added products by reorganising business in India by folding listed and unlisted subsidiaries into four clusters to drive scale, synergies, and simplification and to create value for all stakeholders.

The management’s attempts to sell its assets in Europe have failed twice, and it is now separating Tata Steel Netherlands and Tata Steel UK for finding a sustainable solution.

For Tata Chemicals, spinning off the consumer facing business and merging it with Tata Global Beverages, which was renamed Tata Consumer Products was a big move. Gaurav Garg, Head of Research, CapitalVia Global Research said this helped it to be more competitive.

Focus on aviation

Varun Ginodia, AVP, Ambit Capital said that Tata group's aviation companies -AirAsia India and Vistara- were not able to scale up their operations beyond a certain point as both got stuck closer to 6-7 per cent market share. “Vistara’s product is of good quality and has acceptance among the customers but it has to consistently compete on pricing with other LCCs to gain market share.’ The likely acquisition of Air India could give Tatas a nearly 25 per cent share of the aviation market.

Koushik Jagathalaprathaban, Partner, AT-TV, a consultancy firm, said “Tata group has followed the thumb rule of a long-term strategy. Chandra gave the airlines all the help needed to flourish. Though they are making losses its revenues have increased over the past few fiscals which prove that the strategy slow and steady wins the race is working well for them.”

“The recent buyout of Air Asia was the golden egg for the company because it was able to buy the airline for a cheap price. Besides, now they can integrate in-house services within the Tata Group itself,” he added.

Achin Khanna, Managing Partner - Hotelivate, “After Chandra took over, he managed to hire some really bright minds who were in sync with his vision for IHCL. In the past few fiscals since Puneet Chatwal took over, there was a two-fold impact on growth and revenue. IHCL has been able to see revenue growth of at least 7-8 per cent higher than the industry. Not only that, it reduced costs which gave more cash in hands for the company to invest strategically.” Industry analysts said that Indian Hotels, which was known for just the Taj brand, has been able to build its other brands such as Vivanta, Ginger and Ama.

Automobile turnaround

The biggest turnaround has been in the auto business. Tata Motors began its revival plan about 5-6 years back with a reworked product strategy, investments into new vehicle and powertrain platforms, and by creating a new brand proposition. “Now as 5 years have passed on, we can say that several elements of the plan actually worked out - a new product line up based on new vehicle platforms and installed with new powertrain offerings, launch of EVs, highest vehicle safety ratings,” said Suraj Ghosh, principal analyst - South Asia Powertrain Forecasts, IHS Markit.

“Tata’s decision to invest into new products with the latest design and tech features is paying dividends as now Tata cars have managed to break into the ‘consideration basket’ of buyers, with good sales conversion as well. The numbers of the recent months confirm this,” he added.

Mitul Shah, Head of Research – Institutional Desk Reliance Securities Ltd, said Tata Motors’ focus on improving profitability by various cost-cutting measures for its India, as well as its global business, has been paying off gradually. “Its strategy of controlling capex and preserving cash is helping on its balance sheet leverage front. The company’s new launches in the PV segment in the Indian market is one of the significant moves by the company in the last 2-3 years. Its cost-saving Charge programme launch is another significant move.” said Shah.

Executives close to Chandra said that he has probably achieved 70 per cent of what he set out to do when he took over. “The Tata One vision has brought synergy within group entities such as Tata Consumer Product and Tata Realty. Fund infusion of over ₹20,000 crore has strengthened group companies. Chandra’s fifth year as Chairman of Tata Sons could be the most significant year yet,” said a senior Tata executive.

With inputs from Rajesh Kurup and Suresh Iyengar

Published on February 21, 2021

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