There’s a popular saying which goes by, “Good boys finish last”. While it doesn’t take a genius to find what it means, we can establish that this saying has been proved wrong by the good boy of the Indian business market. We are talking about the Tata Group.
When the annual meeting of Tata Motors was held in August 2020, Tata Group Chairman N. Chandrasekaran pointed out that the company’s share price had crashed to INR65 due to the lockdown in April 2020. The group faced strong criticism from irate shareholders for the automaker’s huge losses, mounting debt, non-payment of dividend for four consecutive years, and the massive dip in investor’s wealth. In response to this, Chandrasekaran implemented strategies, which he called as the “transformative initiatives”, in order to change the perspective of Tata Group in the market.
Less than a year since then, the perception about Tata Motors has changed drastically. The change for this can be owed to the various strategies adopted by the Group.
Starting with the Tata UniEVerse, an electric mobility ecosystem, which allows customers to access a suite of e-mobility offerings including charging solutions, innovative retail experiences and easy financing options. Introduction of such services would help in building up the sales on the Nexon EV and other Tata Motors EVs. With this announcement, the 58-year-old chairman highlighted the automaker’s plan to bring down debt to near-zero from around INR62,000 in the coming three-four years. As a result of this, Tata Motors witnessed its stock reaching an all-time high of INR 530 in November 2021.
Since Chandrasekaran took over as chairman in the Tata Group in February 2017, he has been peddling transformation in each company and their various vertical. Chandrasekaran believed that pandemic just provide a boost to their transformation process. For instance, when Tata Steel was struggling with its European business and as a solution it introduced a low-minimising plan, the focus was then shifted towards the Indian market. Not only this, Tata Power also bid farewell to coal-fired power generation and in return build a portfolio of renewables. In recent strategies, consumer businesses were also brought under Tata Consumer Products (TCPL). This acquisition occurred in late 2021, when TCPL signed a definitive agreement to acquire 100% equity shares of Tata SmartFoodz Limited (TSFL) from Tata Industries Limited, for a cash consideration of INR395 crore. TSFL commenced operations in 2019 and within a short time has established itself as the number two player in the ready-to-eat (RTE) market in India. Under the brand name Tata Q, it offers a range of product offerings which currently includes pasta, noodles, biryani and combo meals. Further strategies of the Group involved combining the aviation business with the recently acquired Air India. Tata Group, which holds 84% stake in Air Asia India has highlighted plans to create a single airline entity for a long time, with the acquisition it can now move forward with its strategies.
With such innovative strategies, the company managed to surpass the expectations of the market, while surprising a lot. They managed to surpass the Group’s market capitalization of $300 billion. The TATA group was able to generate positive returns for its investors in 2021. India’s largest business conglomerate has been able to add $84.75 bn to its market value since the beginning of the year. And most of its listed entities have been able to generate a return of 15% to 370% during the year. The prominent names who have contributed majorly to this rise in Market Capitalization includes,
TATA consultancy Services (52% of total market capitalization)
TATA steel Limited (16.22%)
TATA Motors Limited (6.75%)
Titan Co. Limited (5.07%)
TATA Consumers Limited (4.1%)
The reason for such positive response has been studied as below.
For starters, all the group companies have been able to maintain debt within the acceptable levels, which has played a major role in maintaining the investors sentiment positive.
Recovery in the domestic consumption post COVID-19 has also played a major role in the growth of TATA Group shares.
The Global rise in the demand of luxury cars has played a significant role in the rising demand for the Jaguars and Land Rovers, which has had a boosting impact on the share prices of TATA Motors.
TATA group has been consistently trying to increase their holdings in their companies. They have able to increase their share in TATA power from 35.27% to 45.2%. They also managed to increase their holdings in Air Asia (unlisted) to nearly 84%.
Before Chandrasekaran took over, it was witnessed that the group companies were facing a host of legacy issues. The list included the dismissal performance of Tata Motors’s passenger vehicle business, the losses at Tata Steel Europe and Tata POWER’S 4000-MW Mundra plant, the bogging down of profitability of Tata Chemicals and the troubles at the overseas business of Indian Hotels. Tata Steel hit a potential end in its European business, when it was accumulating losses on a higher scale. The company wanted to exit from the European market when each of its plans, be it the joint ventures with European steel makers came to an end. As a result, the company was forces to launch a loss-minimising plan to keep its business running.
While considering various companies under the Group, one cannot leave the Tata Power, which is in a complete makeover mode. It is rapidly growing its renewable capacities and focussing on transition to an ‘asset- light’ business model. It is also scaling up customer-facing businesses such as power distribution, solar rooftop, solar microgrid and solar pumps, besides launching large-scale solar projects and new services, including EV charging and home automation. It plans to expand its renewable portfolio to 15,000 megawatts (MW) from the current 2,637 MW by 2025 and wants to hive off its renewable business into an infrastructure investment trust and rope in strategic investors. CEO and MD, Tata Power, Praveer Sinha says the company is implementing a 2.0 strategy. “A critical element of the strategy is to strengthen the balance sheet of the company so that it becomes a robust platform for growth. Significant deleveraging has been achieved by divesting identified non-core investments. The company has also made significant progress in the divestment process of the remaining non-core investments and monetisation of its ‘green’ business portfolio.”
Speaking about the future of the Group, Noel Tata, Chairman of Trent Ltd, has highlighted that consumer is God. He marked that the modern Indian retail market is still unorganised and has a lot of growth potential in the coming years. Trent, which operates stores including Westside, Zudio, Star and Landmark plans to embark on a rapid expansion drive after proving the viability of the retail concept with a limited portfolio of stores. Tata Consumer Products’ CEO and MD Sunil D’Souza says the company has put in place building blocks for a future-ready organisation by strengthening digital and accelerating innovations.
Tata Consumer Products was formed in February 2020 to spearhead the FMCG ambitions of the group. “Despite the challenges posed by Covid-19, supply chain disruptions and a volatile environment, we have delivered strong growth consistently. Both our tea and salt businesses in India have recorded double-digit revenue growth and significant market share gains,” says D’Souza. The company has strengthened its e-commerce capabilities. In Q2 FY22, its e-commerce sales rose 39% year-on-year.
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