Tata Group companies prepare for new realities, to focus on execution

With trade wars and protectionism, companies would have to become more agile

Tata Sons Chairman N Chandrasekaran has been able to fix some of the “important and urgent” issues at Tata group companies in the 17 months in office, while some others merit attention, said a source, adding that with global trade wars and protectionism becoming a new reality, companies would have to sharpen focus on execution and become more agile. 

Even as the marathoner continues to solve problems, he is willing to give more time to a capital intensive and a relatively new business like aviation before it starts paying off, said the source. “A new airline will lose money. It’s like saying if you are going fall, then why do you want to run?” he said.

So far, Chandra’s biggest achievements are fixing the haemorrhaging telecom business by selling the mobile telephony arm to Bharti Airtel and cementing a deal between Tata Steel Europe and Germany’s ThyssenKrupp. Without being drawn into the specifics, the source said, “There are still important and urgent matters.”  

Justifying Tata Teleservices (TTSL) sale to Airtel, which had attracted criticism for Tata Sons giving away the company and spectrum for “free”, the source said, it was making huge losses and needed huge working capital every month. There were three choices — sell it off if a company were to buy it, shut it or infuse funds. 

To retain the business, Tata Sons was required to pump in a colossal $15 billion, and the decision was taken to either sell it or shut it.  Shutting it down would have caused lot of pain, selling it off was the only option left.  

“All debts of TTSL have been paid off to banks, only some are left, which can’t be paid off before the regulatory closures,”  said the source. The company is now working on selling the enterprise business to Tata Communications, which is also awaiting government approvals. There is also a need to improve the financials of Tata Communications and a few other group companies. “You will see the balance sheet of most of the companies improve by March 2019,” said the source.

To be sure, even as Chandra and his core team have been busy firefighting, there are newer challenges facing Tata Motors. In the face of the new realties, Jaguar Land Rover, the UK subsidiary of Tata Motors, has no option but to become more prudent about the cost structure even as it has to continue pumping investment for newer technologies. “One doesn’t know what headwinds will come,” the source said. 

The maker of Jaguar F-Type luxury sedans and Land Rover Discovery models, which till two years ago was the jewel in Tata Motors’ crown, drove the group flagship into a decade low loss of Rs 18.6 billion in the June 2018 quarter. It was led by a one-time regulatory issue in China, foreign exchange volatility, uncertainty around Brexit, and poor demand for diesel vehicles in the UK and Europe.

Meanwhile, as part of the so-called cluster approach, Chandra and his core team are also working towards digitally integrating its various retail businesses, the person cited above said. The group’s individual retail businesses — be it Titan, Tata Global Beverages, or Trent that owns and operates Westside stores — are doing very well, the source said, adding, “while the wide footprint of retail firms is a big positive, the fact that there are too many companies, is a negative. There is also work going on in digitally integrating them.”