The Brief: Recalibration Of Tata

TATA GROUP chairman N. Chandrasekaran is regrouping similar businesses across different companies through mergers and demergers to enhance operational synergy and build larger corporations that straddle the entire sector in which they operate.

Chandrasekaran’s business consolidation plan took off with the successful formation of the food and beverages (F&B) FMCG business, TCPL, in 2020. It was formed by merging the consumer products business of Tata Chemicals and Tata Global Beverages. In January, Tata Coffee was also merged with TCPL.

In aviation, legal approvals for Vistara-Air India merger will be completed by October and operational merger by next year. The Competition Commission of India approved the merger of Vistara-owner Tata Singapore Airlines with Air India in September last year. In March 2023, the Tatas merged low-cost carrier Air Asia India with Air India Express. All these leave the group with one full service and one low-cost airline.

In the auto business, Tata Motors recently approved a proposal to demerge the company into two separate listed entities — one each for commercial vehicles and passenger vehicles. It would empower streamlined businesses to deliver higher growth with more agility and accountability. “While there are limited synergies between commercial and passenger vehicle businesses, there are considerable synergies across passenger vehicles, electric vehicle (EV) and Jaguar Land Rover (JLR),” the company said. It added another demerger synergy among EVs, autonomous vehicles and vehicle software.

“The merger of aviation businesses under Air India and Tata Coffee with Tata Consumer Products Limited (TCPL) are expected to bring sharper focus on customer-centric products and services delivery,” says an insider.

In line with the Tata Group’s simplification strategy, Tata Steel amalgamated five strategic businesses — Tata Steel Mining, Tata Steel Long Products, S&T Mining Company, The Tinplate Company of India and Tata Metaliks — and is planning to merge three more, Bhubaneswar Power, Angul Energy and The Indian Steel and Wire Products. The merger of five companies with cumulative annual turnover of ₹19,700 crore in FY23 will help consolidate downstream operations and boost value-added steel business, Tata Steel said in a statement. It will also drive synergies in raw material sourcing, procurement, inventory, logistics and facility utilisation.

The consolidation of Tata UniStore with the group’s e-commerce and retail arm Tata Digital was also part of the plan. UniStore operates fashion and luxury e-commerce platform Tata Cliq. It was Tata Digital that acquired a majority stake in BigBasket and launched superapp, Tata Neu. The merger of Tata Cleantech Capital and Tata Capital Financial Services into parent company Tata Capital was also part of the plan to bring financial services businesses under one roof.

Some more are on the cards as well. Tata Power, which merged loss-making Coastal Gujarat Power (CGPL) with itself, is looking to bring all its renewable assets under Tata Power Renewable Energy to improve efficiency. Consolidation of housing and realty business is another possibility. Chandrasekaran wants every idea to be executed “flawlessly and with speed.”

The group believes the realigned companies will be able to deliver better products using AI and Internet of Things (IoT). “The next decade will belong to companies which excel in giving customers excellent experiences. With our growing footprint in consumer businesses, we have to bring empathy to every interaction — be it in Air India, Tata Motors or Titan,” Chandrasekaran said in his New Year’s letter to employees.