Metamorphosis
Since Chandrasekaran took over as president in February 2017, the group has focused on 3S: simplification, synergy and scale. The group companies have simplified their business structures and expanded scope and scale by modernizing traditional businesses and adding new ones. Similar businesses such as consumer and retail, financial services, and aviation and defense were regrouped into 10 verticals to achieve synergy-related benefits.
To address the problem of legacy assets, products or services burning a hole in the group’s balance sheet, Chandrasekaran put together a plan. According to him, Tata Motors stopped the production of Nano cars, while Tata Tele left the consumer telecommunications business. Tata Sons paid Rs 5,850 crore to Japan’s NTT Docomo to buy back the latter’s stake in Tata Tele, and Rs 38,000 crore for debt payments and spectrum liabilities.
Tata Steel recently spun off its profitable Netherlands business from its loss-making UK unit. The company is currently in talks with the UK government for support to convert its units, including the old Port Talbot facility, to sustainable technologies. It is looking to convert Port Talbot into a scrap electric arc furnace as the country has a large amount of scrap available and has already undertaken several initiatives to reduce business risk, particularly in the supply chain and procurement. Tata Steel is also investing in technology and digitization to boost productivity and improve resilience.
Another losing unit was Coastal Gujarat Power Ltd. (CGPL), a power generation company owned by Tata Power. Lenders are likely to reduce their ₹8,000 crore loans to CGPL in order to revive the ongoing losses suffered by the plant since its inception. The unit is currently operating at 60% capacity after Gujarat and Maharashtra agreed to get electricity at a higher price.
In addition to solving long-standing problems, Chandrasekaran marshaled resources to identify business opportunities. The launch of the Nexon and Tigor EV versions has given the company a significant advantage in the electric vehicle business. In October last year, a group of investors led by TPG Rise Climate agreed to invest ₹7.5 billion rupees in Tata Motors’ EV subsidiary for an 11-15% stake. The deal valued Tata’s electric vehicle business at $9.1 billion.
