Tata Group sets sights on five growth engines

MUMBAI: Tata Sons chairman N Chandrasekaran said the holding company of the $110-billion group has resolved the high leverage at its flagship operating companies and is turning the focus toward funding growth across businesses. It has set an ambitious target of making at least five of the group’s 10 verticals contribute 10-15% each to the Tata Group’s profits in contrast to the current situation when TCS contributes the bulk of the profits.“At Tata Sons level, if you really look at all known direct exposures, we are sorted,” Chandrasekaran said in an interview to ET. Untitled Carousel 70763087 Many operating companies had carried huge debt, telecom in particular. Many leading Indian conglomerates are currently slashing debt, enlisting strategic partners or selling assets. Tata Sons under Chandrasekaran has also undergone a deleveraging exercise, exiting the retail telecom business and repaying lenders.“If you look at the overall debt of the group, largely the net debt is very comfortable in terms of our ability to service them.” Total net debt is about Rs 1.7 lakh crore, mostly owed by three companies — Tata Steel, Tata Power and Tata Motors, he said.“All the businesses are scaling up and about Rs 22,000 crore in terms of capital has been deployed from Tata Sons till date to recapitalise companies excluding telecom,” he said.Chandrasekaran is confident that the three companies can service debt on their own, without relying on Tata Sons. While the net debt position is comfortable, cash flows have increased, he said.“I would like to be in a situation where, from the 10 clusters, at least five clusters give me profits of 10-15% of the group,” he said. “We're working on it and that's what we want.”The five clusters are Tata Motors, Tata Steel, Tata Consultancy Services (TCS), financial services and retail. TCS, 72% owned by Tata Sons, contributes about 75% of the group’s profit. It posted a net profit of Rs 30,065 crore in FY19.Tata Sons Infuses Rs 1,000 Cr in Digital VentureChandrasekaran spoke of a new business that the group was in the process of setting up but declined to provide too many details. “We have created a new company called Tata Digital,” he said. Tata Sons has infused Rs 1,000 crore by way of equity, he said. “The company will create a number of digital platforms. We have already identified the platforms we want to create. The first platform is already being built and the next two to three platforms are in the process of being developed,” he said. “So, each one of these platforms lets us (focus on) a particular segment and particular need—some will be B2C platform, some will be B2B platforms, some will be B2B, B2B2C platforms.”GLOBAL HEADWINDSChandrasekaran is unfazed by the grim economic outlook in India and the global slowdown.“I like to take a long-term view of the economy,” he said. Recalling his time as CEO of TCS, the group’s most profitable company, he said: “I never used to present 15 charts on the macro economy. At best, I'll spend half a chart on the macroeconomy because that is not in our control. There are so many economists who will give you 20 different interpretations.”His logic is simple: “You just have to worry about what you can do, your circle of influence and you need to see what we can do. If the growth is slowing down, then you need to see how do we still grow.” The focus will be on costs and being optimal. “You need to take the economy over a five-year horizon, you can never view it in a six month, one-year horizon,” he said.Citing the troubles at Jaguar Land Rover, Chandrasekaran said the group is steadfast on investing for growth. “We can't take a doomsday, we won't invest, kind of call. While we have to tighten the belt so that we don’t run out of cash, we can't stop investing. For instance, the automotive sector is a fast changing business—with electric cars (coming in) and supply chain impacts with Brexit,” he said. “But we have to be ready when the market comes back. We have to withstand pressure even when it is too much. We are embarking on a process of simplifying, synergising and scaling (3S) to create an agile, powerful platform.”The group has made significant headway this year in strengthening balance sheets and building healthy cash flows. “In total, we committed over Rs 70,000 crore to deleverage and restructure Tata firms, consolidate cross-holdings, acquire strategic assets and infuse much-needed capital for future growth,” he said.“At the same time, our collective market capitalisation crossed Rs 10 trillion in 2018.”ON RATAN TATA’S INFLUENCE“Let me be pretty candid. When you are managing a group like Tata Sons, every decision you take has to take into account many aspects,” he said. “You don’t want to take decisions purely based on a spreadsheet. The group has been there for a very long time. And there are so many decisions that have been taken in the past with a particular context and reason. Those reasons may have changed. But it doesn’t mean you immediately undo that.”He said he valued Ratan Tata’s advice. “I have to carry my board, (and) operating company’s board. If I have to take a decision which is very important, it is not that I worry what (Tata Trusts chairman) Ratan Tata will say,” he said. “I will go and reach out and ask-—this is what I think—and seek his opinion. Because you have to respect the fact that he has seen this all. But it doesn’t mean I go and ask him for everything.”

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