Tata Sons infused over Rs 80,000 crore and made additional secondary market purchases of around Rs 10,000 crore in group companies in the past five years to strengthen their balance sheets.
The holding company of the $125-billion steel-to-consumer goods conglomerate also infused an additional `20,000 crore into new businesses such as the consumer app — Tata Neu, Air India, as well as upcoming forays into sectors such as semiconductors, batteries and 5G. It has also already infused as much as Rs 15,000 crore since January 2022 into the resurrection of its recent airline acquisition, Air India.
“Tata Sons and group companies are well-capitalised with robust balance sheets and every major company has staged a turnaround in the last four years to contribute in a significant manner to group profits. I am happy to say today all companies have strong balance sheets and from where we are today, we do not see the need for Tata Sons to infuse any additional funds into these companies. Now Tata Sons will focus on future growth businesses. It is possible now because all group companies are aligned and huddled together and each management is focused on goals, aspirations and performance,” Tata Sons chairman N Chandrasekaran said in an exclusive interview held at Tata Group headquarters, Bombay House.
Chandrasekaran was reappointed as chairman of Tata Sons for a second term of five years in February this year. He joined the Tata Sons board in October 2016 and took charge as chairman in February 2017.
Chandrasekaran also chairs the boards of operating companies such as Tata Steel, Tata Motors, Tata Consumer, Tata Power, Air India, Tata Digital and TCS, among others.
“Capital deployment has been robust across companies. Earlier, every big company whether it’s Tata Power, Tata Motors or Tata Consumer had a negative story spinning around it. Today, that commentary has changed and every company has a positive story. I am extremely proud of how all these companies have staged a turnaround backed by group synergies. Fundamentally, all initiatives we undertook had three pillars: Strengthen the core, transform the core and create future businesses,” he said.
“We followed a combination of principles and strategies over the last five years where we said, fitness first, performance next, and we capitalised all our companies,” Chandrasekaran said.
Between 2017 and 2022, revenues of Tata Group have grown 1.5 times from Rs 6.5 lakh crore to Rs 9.5 lakh crore. The profit after tax grew 2.7 times from Rs 27,500 crore to Rs 75,000 crore, or close to $10 billion. PAT, excluding TCS, grew from Rs 1,100 crore to Rs 36,500 crore.
ROE grew from 11.5% to 21% while ROE excluding TCS grew from 1% to 14%. Market capitalisation excluding TCS grew 2.8 times from Rs 3.6 lakh crore to Rs 9.9 lakh crore. Including TCS, it grew from Rs 8.5 lakh crore to Rs 23.6 lakh crore.
The group is also doing some heavy lifting on its Air India acquisition.
“Air India is a hugely important business and not just a pure emotional investment. We will do all we can to make it work. I am personally spending a lot of time on Air India. We are not being negative or pointing fingers at anybody, but a lot of work needs to be done on IT systems, processes, maintenance, fleet, ground handling, HR, training, network planning. We are working on all dimensions. Air India needs the fleet properly maintained, there is flight delay because of fleet issues, we need spare capacity for fleet and engines. Our job is to address all these aspects. We are working on reorganisation of Air India through talent, training, deployment of IT systems to offer better products with a modern fleet and drone handling through data analytics. There is a significant amount of work to be done,” he said. “There is no magic wand to ensure everything will be fine tomorrow morning. Be patient. We are fixing issues systematically and there will be no temporary fixes. Air India will always be the national carrier and our flagship company. It will also be a financially viable one. In the next 12-24 months there will be visible progress.”
Tata Sons is now focussed on making serious commitments to five businesses — Tata Neu, which is the foray into the digital consumer business, Air India, semiconductors and precision electronics, 5G, and batteries. “5G has got the solutions proven in the lab, 4G has been proved and we are looking at commercialising the solution, 5G and 4G needs time to scale. We will also manufacture car batteries and continue to build along the value chain such as cellphones and we are committed to investing and building a global business,” he said. The group is aiming to build a “5G stack” which it will aim to sell to global markets.
The new businesses may rope in strategic or financial investors depending on the kind of capabilities or strength they bring to the business, he said Tata Sons is also betting big on building a strong semiconductor and electronics value chain with a global focus that will throw up a few lakhs of job opportunities in the next five years, Chandrasekaran said. Creating resilience in the global supply chain is a big theme and the group has identified it as an opportunity. “We are in the phase of building our electronics business and are focused on precision manufacturing followed by packaging, assembly and testing. We will continue to build along the value chain and are committed to investing and building a global business.” Initially the group would focus on basic semiconductors.
The group has now initiated a transformation of core businesses focused on four themes— digitalisation, sustainability, supply chain resilience and health, wellness and safety. “Digitalisation is a journey where every company thinks data first. A sustainable transformation is the market transition we are making whether in EV or fuel, renewable energy and carbon capture and the huge commitment towards biodiversity and water consumption. We have a comprehensive plan across the group to be net zero by 2045 and every company has a goal set in terms of all these dimensions,” he said.
Dismissing criticism around some of the decisions in the last five years, Chandrasekaran said, “We cannot be distracted with criticism. Some criticised us with data and some without data. All decisions are taken backed by enough conviction, belief and commitments.”
Geopolitical issues have been a risk factor in business and have intensified because of the Russia-Ukraine war.
The effects of the pandemic, war and supply chain shortage are all driving higher inflation. “What looked like high growth, high inflation in January now looks like a low growth and high inflation environment globally. But I feel India stands out, India has a higher consumer spend. We see it in both discretionary and essential items across tier 1,2,3 and 4 towns. While we have to control inflation, it is important for us to protect and capture growth. So our capital expenditure on infrastructure should continue. My view is that growth creates jobs and takes care of many issues,” said Chandrasekaran.