The $104-billion Tata group will kick off a new round of consolidation two months after it restructured operations under 10 verticals. The group may make an announcement on Wednesday about transferring the consumer products business of Tata Chemicals to Tata Global (TGBL) as part of a larger mandate to bring food and beverages under one unit.
Tata Coffee, an arm of TGBL, may also be merged into the latter, as the group looks to streamline operations under the consumer and retail vertical, one of the 10 pillars identified by group Chairman N Chandrasekharan, persons in the know said.
Some of the other verticals created by Chandrasekharan include information technology, steel, automotive, infrastructure, financial services, telecom and media, and aerospace and defence.
The group has already consolidated operations of companies under aerospace and defence in a bid to improve synergies and is expected to do the same across other verticals. The consolidation in the consumer vertical is part of this exercise, persons in the know said. The Rs 1,847-crore consumer products business of Tata Chemicals, which includes food brands such as Tata Salt and Tata Sampann, contributed 16.35 per cent to the company’s top line in fiscal 2018-19 (FY19). Contribution to profit before interest and tax was nearly 18 per cent at Rs 314 crore in the year under review.
The coming together of food and beverages under TGBL is expected to lend significant heft to the latter, which had been contemplating a foray into that space for a few years now. To be sure, the move to get into foods was first mooted during Ratan Tata's chairmanship, but was never executed as TGBL chose to consolidate its core beverage business after a string of acquisitions between 2000 and 2010 largely in foreign markets.
The company closed FY19 with a top line of Rs 7,252 crore, a year-on-year growth of 6.4 per cent, while profit after tax declined 16.4 per cent from a year earlier to Rs 474 crore due to exceptional items. Under Chandrasekharan, TGBL has switched focus to its India business, which contributes 49 per cent to its branded business. The overall branded business gave TGBL nearly 89 per cent of its revenue in FY19. This contribution is expected to go up in the next few years as TGBL gets out of tea estates, which makes up its non-branded operations.