Tatas Kick Off Group Restructuring

The Rs 30,000 crore Tata group is learnt to have accepted several of the recommendations submitted by management consultancy McKinsey & Co to group holding company Tata Sons earlier this month. A high-level committee, consisting of senior Tata executives, will now be formed to supervise the implementation of the recommendations.

McKinseys much-awaited report outlines various measures to restructure the group, which consists of over 80 companies at present. In a preliminary draft submitted some months ago, McKinsey had recommended that the Tatas divide their companies into three layers. While the first layer would comprise core companies like Tata Steel, Telco, Tata Chemicals, Tata Tea and Tata Electric Companies, the second layer would include information technology and telecom companies. The third layer would be made up of service companies like Indian Hotels.

McKinsey had advised the Tatas to divest their holdings in other group companies at an opportune time and price.

The final report delineates the groups core strengths and suggests stepped-up activity in these areas. It also calls for mergers of group companies involved in similar activities and a pull-out from peripheral areas, Tata sources revealed. The key is not to be the biggest but the best, the sources added.

The Tatas have already started implementing some of the recommendations. They have decided to offload their 47 per cent stake in pharma major Merind. Consumer electronic major Voltas is also set to be restructured, with the white goods business being divested.

Besides the implementation of the McKinsey recommendations, the countrys largest industrial house is expected to witness a major revamp at top management levels. Eight directors of Tata Industries have decided to step down, making way for fresh blood. A decision has been taken that all directors of Tata Industries who are over 70 years should step down. Besides, it has been also decided that all those directors who are concurrently on the board of both Tata Sons and Tata Industries should step down from one of the boards, the sources said.

A Tata Sons board meeting, scheduled for early next month, is expected to take a decision on this issue. The revamping of Tata Industries, the premier promoting entity within the Tata group, is expected to facilitate the implementation of the McKinsey recommendations.