Tata Technologies, a subsidiary of Tata Motors, has advanced its target of crossing $500 million in revenues by a quarter to the three-month period ending December 2021. This is mainly being driven by electrification programmes, connected services and digitisation, its CEO Warren Harris said in an interview with Rajesh Kurup.
Tata Technologies now expects to clock $500 million in revenues in the third quarter itself. Where is the growth coming from?
We will be crossing $500 million in revenues in Q3 itself, posting a 40% increase over the entire FY21. The growth is relatively broad-based and is driven by the move to electrification, connected services and digitisation of the manufacturing sector. In the last two quarters, all the industry sectors we are engaged with, even aerospace, are starting to come back. Our real engine for growth over the last 18 months has been automotive. We have also secured a number of high-profile electric vehicle (EV) programmes, which is driving topline and margin growth.
Which are the regions that are coming back to normalcy?
Our China business has bounced back, North America continues to improve and even mainland Europe, despite the constraints imposed upon the economies due to Covid-19, continues to do well. Germany has been strong for us in the last six months.
In 2017, Warburg Pincus was close to making an investment in Tata Technologies?
At the last minute, they decided not to invest. We had a number of closing issues that precipitated the walking away of both sides, and so that deal was not consummated. In 2013, Tata Capital invested in the company and now holds a 13% stake. Tata Motors owns 72% and the remaining is held by employees and directors.
How is the shortage of semiconductors impacting your business?
It’s an issue for our clients today and they are reducing the number of product units that they are building, and adjusting supply chains and inventory. We see some green shoots and expect things will improve, particularly as we move into the new calendar year. We have seen a significant improvement in capex across sectors, and that has not been compromised or undermined by the chip shortage.
There is a huge waiting period for Tata Motors’ passenger cars, especially Nexon. Is this due to chip shortage or demand?
It’s a combination of both and they are taking steps to deliver products more quickly. Tata Motors has a market-leading position in EVs, which will not only benefit Tata Motors and Jaguar Land Rover, but organisations like ourselves, as we will be providing engineers and intellectual property to the parent.
Tata Technologies has always looked at acquisitions as a growth engine. Would this be a strategy going forward?
It is a component of our strategy. We had put this on hold due to the automotive downturn in 2019 and the initial phases of Covid. But over the last 12 months we’ve been active in identifying targets and engaging in discussions with a number of targets. We are looking for digital capabilities and looking at Eastern Europe, China and regions like Vietnam as potential delivery locations.
Is Tata Technologies looking to raise funds through an Initial Public Offering?
The option was always considered, but there is nothing in place at the moment. We don’t need the capital. We are growing in an accelerated way without the benefit of being publicly listed. It’s an option that’s available to us, but it’s not a priority at this point.
When do we see the auto market bouncing back to pre-Covid levels?
As far as the market is concerned, it will take another 12-18 months to get back to the levels that we saw in 2018. There are supply-side constraints and chipset supply issues, and these will constrain the ability of the OEMs (original equipment manufacturers) to build and sell as many products as the market needs.