Excl: How Chandrasekaran is trying to bring consolidation, synergy, and scale in Tata Group

Moneycontrol News
Recently-appointed Tata Sons Chairman Natarajan Chandrasekaran is clear in his mind that the sprawling Tata Group has to be streamlined -- with several businesses needing to be consolidated, and others scaled up further.

Chandrasekaran, the former CEO of key Tata Group company TCS, took charge as chairman of the group’s parent firm, Tata Sons, after the bitter ouster of Cyrus Mistry earlier this year.

Since then, he told CNBC-TV18’s Shereen Bhan in an exclusive interview, he has been busy collecting data, formulating strategy, building a team and laying out a capital allocation plan for the USD 100 billion-plus group.

The Tata Group has about 100 operating companies, 29 listed entities and over 900 subsidiaries, but the top 10 companies account for 94 percent of the group’s revenues.

The top companies include TCS, Tata Steel, Tata Motors and Tata Power, among others, and Chandra at length outlined the broad-based strategy for most of these while avoiding going into specific in some cases.

“There are three big companies -- Tata Steel, Tata Motors and TCS -- and they have scale. If you take the remaining, there are a number of companies in different sectors, but they have not scaled up. So I need to figure out a way of scaling them up,” he said.

Besides these three, the Tata Group will look to focus on five segments: retail and consumer, financial services, infrastructure, tourism and defence.

“All of them present significant opportunity of growth and we want to address that. There we need to see how to consolidate where we can, how to synergise where we cannot consolidate and how we scale,” he said.

But he refrained from saying whether or when the group would decide to take a serious call on consolidation or shutdown for scores of small Tata firms, many of which have either similar businesses to other group firms or are under-performing.

When asked whether he would apply the “rule of three” to each of Tata’s business (which calls for a conglomerate to operate a firm only if it among the top three in the industry), he said the direction of the companies would matter.

“I think the group has enormous opportunity and we have people who want to deliver and we want to look at each of these companies where they are and where they can reach as an aspiration, but they cannot overnight switch to some number one position or number two position. That will be a very unfair ask. But as long as we can move in the right direction with the right velocity, we are fine.”

The Tata Group has nearly a billion customers, Chandrasekaran said, adding, it has the most "powerful story" and the "biggest opportunity" on the consumer business side.

"Our consumer businesses have to scale and whether it is in terms of only merely consolidation, the answer is no. There may be consolidation opportunities, but also we have to look at our product portfolio," he said. We will have to take a call on which markets in which we operate because I feel that the domestic consumer market is huge.”

The Tata Sons boss’ touched upon problem areas, such as Tata Teleservices, which is caught in a litigious battle with its Japanese partner NTT, and Tata Power’s Mundra plant, which has suffered from a lack of supply of cheap coal.

But overall, Chandrasekaran said he was quite satisfied to see the progress the company made since he came on as chairman.

He said he was also enjoying the move from TCS on the personal front. “I am very regular [with running] now because the travel has come down. The number of days I used to travel in TCS has significantly come down. So on a personal front, it has been fantastic.”