Natarajan Chandrasekaran, the recently appointed Chairman of Tata Sons, believes that consolidation is the way forward for the near 150-year old conglomerate.
Natarajan Chandrasekaran, the recently appointed Chairman of Tata Sons, believes that consolidation is the way forward for the near 150-year old conglomerate. The veteran is trying to find ways and means to ‘scale up,’ and consolidation of businesses is certainly one of the important ways, according to him.
The Tata Group has about 100 operating companies, 29 listed entities and over 900 subsidiaries, but the top 10 companies account for 94 percent of the group’s revenues. Elaborating on the strategy of the three biggies — Tata Steel, Tata Motors and TCS, N Chandrasekaran told CNBC TV18, “There are three big companies — Tata Steel, Tata Motors and TCS — and they have scale. If you take the remaining, there are a number of companies in different sectors, but they have not scaled up. So I need to figure out a way of scaling them up.”
The Tata Group looks to focus on five segments: retail and consumer, financial services, infrastructure, tourism and defence, to achieve scale. Elaborating on the strategy for these 5 segments, Chandrasekaran said, “All of them present significant opportunity of growth and we want to address that. There we need to see how to consolidate where we can, how to synergise where we cannot consolidate and how we scale.”
In terms of the next biggest opportunity, N Chandrasekaran has his eyes on consumer businesses, which remains a ‘powerful story,’ according to him. “Our consumer businesses have to scale and whether it is in terms of only merely consolidation, the answer is no. There may be consolidation opportunities, but also we have to look at our product portfolio. We will have to take a call on which markets in which we operate because I feel that the domestic consumer market is huge,” he pointed out.
Tata Sons is in the middle of a massive exercise to clean up the ownership structure of its group companies, with the holding firm Tata Sons buying equity shares held by various group entities one another through a complex web of crossholdings worth Rs 6,000 crores. In September this year, Tata Sons bought equity stakes in Tata Motors, Tata Beverages and Tata Chemicals by picking up shares of these companies from other group outfits. Tata Sons bought 43.18 million shares at Rs 213.35 apiece in Tata Global Beverages from Tata Chemicals.
In a bid to take its steel business forward, the Indian major signed a Memorandum of Understanding with thyssenkrupp AG for a 50: 50 joint venture for their European Assets in September. “The proposed 50:50 joint venture – thyssenkrupp Tata Steel – would be focused on quality and technology leadership, and the supply of premium and differentiated products to customers, with annual shipments of about 21 million tonnes of flat steel products,” Tata Steel said in a press release.
The joint venture will have a turnover of Rs 1,15,000 crore.The company will be headquartered in Amsterdam, Netherlands. As per the company’s estimates, cost synergies for the company is expected to be in the range of 400-600 million euro per annum.