Chandra seeks to rewire Tata Group for post-Covid world

MUMBAI: Ahead of a Tata Sons board meeting on Friday, chairman N Chandrasekaran is understood to be sharply recalibrating the group’s business strategy.Into his fourth year as chairman, Chandrasekaran is keen to find solutions to the problems facing the group’s money guzzlers such as Tata Steel Europe, Tata Motors-Jaguar Land Rover and Tata Power. He is also likely to suggest prioritising capital allocation to businesses such as medical devices and the creation of a large-scale digital platform, which offer better growth prospects.The board meeting, to be held via video-conferencing, is expected to be significant in terms of preparing a post-Covid-19 road map, officials said. Approval will also be sought for fund-raising by Tata Motors and JLR, which are facing a challenging environment.Roping in big investors for JLR and UK steel business will also be considered if talks with British government fail. Tata Steel and JLR are in talks for financial aid under the Coronavirus Large Business Interruption Loan Scheme. However, not much headway has been made, officials said. The group is not keen to let government hold stakes in the firms, an official said.‘Chandra Impatient for Growth’Officials close to the developments said Chandrasekaran is in a Catch-22 situation, as he has to allocate funds to stressed firms to ensure liquidity while also ensuring funds for capital investments.The current year is likely to be written off in terms of growth and profits, and some tough decisions are likely soon, said an official, who requested anonymity.76186925“The chairman is now impatient for growth and keen to get the board’s approval and suggestions for one-time solutions. He is also keen that the board be apprised of all the issues and the urgency to invest in growth-builders,” said an official close to Tata Sons. It is understood that the board will be presented a blueprint for growth in a post-Covid world. Besides investment in new areas, massive cost-cutting measures will also be outlined.Tata Sons did not comment on the agenda for the board meeting.Digital Plans“Before Covid, a lot of investments were made in steel, hotels, aviation, financial services and retail. Medical devices and acquisitions in the FMCG space are now focus areas. Also, there is now greater urgency for completion of the ambitious digital plan,” officials said.Tata Digital, the group’s new venture, seeks to bring together businesses of the group on a single digital platform using artificial intelligence and consumer data to create a large new-age digital business.Many of the businesses that the group had bet on — notably hotels, retail and aviation— have taken a massive revenue hit on account of the pandemic.The ambitious electrical vehicle plan too has taken the backseat. The proposal entailed Tata Power bringing in knowhow and domain knowledge (such as home, public and fleet charging); Tata Chemicals and Tata AutoComp Systems providing battery technology localisation and powertrain system; and Tata Motors Finance offering financing options. Other group companies such as Titan, TCS and Tata Technologies were also to be roped in for components, software and design.“The money guzzlers are the steel and auto businesses outside the country, and Chandrasekaran is keen that the group should be able to tap growth opportunities within India in the post-Covid environment. He sees this crisis as an opportunity to rewire the group strategy for growth,” said an official.Between FY17 and FY19, Tata Motors, Tata Steel and Tata Power invested a cumulative Rs 74,000 crore of capital. Since the beginning of FY18, Tata Sons has infused Rs 20,000 crore of growth capital into group companies, leading to higher shareholding in these firms.Looking for opportunitiesChandrasekaran has been poring over the balance sheets of all operating companies to identify the ones that present opportunities for scalable growth, an official said. “He ought to have taken tough decisions before Covid, which could have quickened the pace of change that the Tata Group requires currently,” said a former director of Tata Sons.Tata group stocks have declined an average 20% since February 19 due to the massive selloff caused by the Covid-19 outbreak. The group’s market capitalisation has shrunk by Rs 1.5 lakh crore since then and now stands at Rs 10.57 lakh crore.While Tata Consultancy Services has lost Rs 59,000 crore in market cap, Titan and Tata Motors have lost Rs 30,000 crore and Rs 22,000 crore, respectively. The stocks of 12 of the group’s 28 listed companies, including Tata Motors, Indian Hotels, Tata Steel and Trent, have declined 25-45% since February 19.Go-slow on capexTata Sons, the holding company of the $113-billion Tata group, recently called for a go-slow on capex plans and directed each operating company to build scenarios for three-six months. The group, which has begun manufacturing ventilators to assist the government in tackling the coronavirus crisis, has also ventured into production of other medical devices. For the first time in the group’s history, the chairman of Tata Sons and the CEOs of all operating companies will take an estimated 20% cut in compensation. Top officials said the reduction would primarily be in bonuses for the current year.

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