Can Tata lifer and Tata Sons chairman Natarajan Chandrasekaran, 60, pull it off?

To understand the current phase of restructuring and growth, it is useful to look back. When Ratan Tata took over the reigns of the group in 1991, he had many challenges including fiefdoms of various companies run by Tata old timers.

Over 20 years till he retired in 2012, he established his control over the group systematically by removing legacy satraps. Apart from making the group companies more efficient, he also went about the early phases of globalising the group through takeovers across the world like that of Tetley, Corus and Jaguar Land Rover.

By 2012 when Ratan Tata stepped down as chairman, he had increased the turnover of the group 43 times and net profits by 51 times. During this period, the aggregate market capitalisation also increased 33 times. Essentially, Tata consolidated the group into a more cohesive one.

Consider just three of the main restructuring work going on in the group. A few weeks back, Tata Motors announced the demerger of the company into two entities of passenger vehicles (PV) and commercial vehicles (CV). This seems to be a logical extension after the turnaround of the company that was scripted over the last few years.

The challenge is that they can be harnessed between PV, electric vehicles (EV) and JLR, there are only limited synergies between PV and CV.  

At Tata Consultancy Services (TCS), it is still work in process of consolidating the gains from the June 2023 vertical operating structure changes after the new CEO K. Krithivasan took on the reigns of the company. There have been many leadership changes at TCS and it now needs to stabilise that.

The restructuring and integration of the group’s aviation business is expected to be done by end 2024. The Tata Group is merging four airlines into two. Air India has an ambitious five-year plan called Vihaan.AI to become one of the leading aviation airlines in the country and outside. 

Tata Sons, the holding company of the group where the philanthropic Tata Trusts have about 66 per cent of the equity, has to go public by September 2025 as a per a 2023 directive by the Reserve Bank of India.

Even though there are some reports that the group is looking at alternatives to an Initial Public Offering (IPO). While this option will unlock a lot of value for the group, it will also expose it to the challenges of being a public limited company.

A closer look into the market capitalisation of Tata Group Companies listed on the Indian Stock Exchanges stands at over Rs 29 trillion as after closing on 26th April 2024.

Growth Mode 

The real growth phase of the Tata group in recent years started with N. Chandrasekaran taking over as the chairman of Tata Sons in 2017 after a difficult and uncertain period when Cyrus Mistry was heading the group. Chandrasekaran went about systematically, firstly when Mistry acolytes moved out and established his own team.

From the traditional areas that the Tata Group had essentially moved into, it also entered new sunrise industries like semiconductors, technology, artificial intelligence and renewable energy. In the last seven years he has been the boss, he also revived the steel and vehicle businesses.

Even as the group restructures on multiple fronts, it is also on a high-speed growth trajectory at the same time. Towards this, it has both greenfield and acquisition plans. The acquisition of Air India is a challenge and an opportunity. However, while executing changes at the brand make-up level in terms of new uniforms for the staff, there has been many complains at the customer service end.

In another domain, after acquiring Capital Foods and Organic India, the group’s fast-moving consumer goods (FMCG) maker Tata Consumer Products Limited (TCPL) is scouting the market for more acquisitions.

Tata Electronics will build a mega semiconductor fabrication facility in Dholera, Gujarat in partnership with Taiwan’s Powerchip Semiconductor Manufacturing Corporation (PSMC) which will provide technology and execution support for the greenfield facility in Gujarat with a total investment of up to Rs 91,000 crores.

Moving towards greater consumer focus, the group has also created its super-app Tata Neu. In the past, much of the businesses were B2B businesses. That is changing now and will test the group’s adaptability. 

Looking Ahead

While planning for the future, the group is focusing on the core businesses like Tata Steel and Tata Motors and at the same time, incorporating digitisation, sustainability, resilient supply chains and incorporating artificial intelligence. The group also hopes to transition into 70 per cent green energy by 2030. All these are not going to be easy.  

The thrust towards globalisation started with Ratan Tata, but has been accelerated under Chandrasekaran. Today, a significant portion of the group revenues, come from outside India. 

Ratan Tata, 86, and chairman of Tata Trusts, has not yet formally chosen a successor from within among several trustees. This is critical since Tata Trusts have a significant holding company, Tata Sons. Any significant change to the unique culture and values that the group believes it has, will in turn impact the culture of the entire group. Clearly, it is at an interesting inflection point. 

(George Skaria is New Delhi-based business journalist with more than three decades of experience of covering the corporate world. Views expressed are personal)