Tata's spending on R&D up to 2.5% of revenue

Group firms Tata Technologies and Tata Elxsi traget $45 billion potential market for India's E&D export

India’s largest business house, Tata Group, on Thursday said it had increased its spending on research and development (R&D) to 22.5 per cent at Rs 13,223 crore in 2012-13.

“This is roughly 2.5 per cent of our total turnover,” said Mukund Rajan, brand custodian and group ethics officer at the group’s holding company, Tata Sons. Rajan had, in April, estimated this to be similar to the previous year’s spending of about two per cent.

With Cyrus Mistry — who became the group’s chairman after Ratan Tata retired on December 28 last year — looking to enhance customer focus for all the group companies, the business house is expected to increase its R&D spend in the coming years.

Also, the group firms —Tata Technologies and Tata Elxsi — are targeting a fair share of a potential $45-billion opportunity for exporting engineering and design (E&D) products from India by 2020.

The group’s R&D is connected with its spending on design and innovations. Its spending for design-driven innovation included the Mia brand of jewellery for working women, for Tanishq.

The challenge for the company was that working women were not buying precious jewellery. as it did not meet their design and style requirements. The existing designs were too expensive and heavy. So, the company launched 14-carat gold ornaments, which were affordable and light-weight. In about a year, Mia raked in Rs 200 crore.

Similarly, Tata Technologies is using engineering and technology in designs to convert consumer insights into class-defining products.

In 2012-13, about 45 per cent of Tata Technologies’ revenue of about Rs 2,500 crore was generated through design activities.

According to industry lobby Nasscom, by 2020, global spending on E&D services is expected to touch $1.6 trillion by 2020, up from $1.3 trillion in 2011. Out of this, offshore spending is expected to be $116 billion.

This is likely to create a $37- to $45-billion market for India’s E&D export, which companies such as Tata Technologies and Tata Elxi are targeting to have a dominant share.