In his first interview after being appointed to the Tata Sons board, Tata group veteran Bhaskar Bhat says that the group's focus will be to increase collaboration between companies and scale up businesses to leadership positions. Speaking exclusively to CNBC-TV18's Priya Sheth, Bhaskar Bhat who is also the MD at Titan Company says that that the company aims to hit USD 5 billion in revenue by 2025.
N Chandrasekaran has laid out the group’s way of operating going forward and in his address he talked about being more focused, being more agile and more importantly scaling up businesses to leadership positions, said Bhat.
Below is the verbatim transcript of the interview.
Q: It has been over 30 years for you at the Tata Group and you have recently been inducted on to the board as far as Tata Sons is concerned. Wanted to understand your vision as far as the Tata Group’s consumer business is concerned considering the fact that you are the one on the board with the consumer expertise as well?
A: To be honest, on the Tata Sons board, it is not even one-meeting old, so I don’t know what the expectations are. So I won’t be able to answer any of these questions. Tata Group is in so many consumer businesses, it is not about consumer business – when you are a director, you are a director. So I have not thought through that and as of now, it is running Titan, which is the focus apart from being on certain other Tata company boards.
Q: You have been a senior leader at the Tata Sons and recently we have seen a change of guard as well at the Tata Sons. Wanted to understand from your perspective, on the Tata Group of 2017 if you look at it at this point in time, do you see it as a more linear, a more agile organisation as of now?
A: It is still early days. Chairman N Chandrasekaran has clearly laid out the way of operating as we go forward and he was here at Titan and in his address, he talked about being more focused and first establishing an aspiration and then following that up with resourcing and following through on that aspiration, structure and strategizing and then structure and resourcing and being more agile. But more importantly, I think scaling up businesses to leadership positions in each of their industries. These would be important drivers going forward. So I expect that all of us will be moving along that path of leadership and scale.
Q: The Chairman, when he took over, also mentioned as you also said that collaboration is a very important aspect of Tata Group companies and the businesses and cutting across verticals is what the key focus of the group is going to be at this point in time. When you specifically look at the consumer cluster, as you speak at the Tata Group, we have seen collaborations happening from Titan, we have seen TCS and Tata Chemicals coming together for Tata Swach which was the purifier. I wanted to understand whether such collaborations among the businesses will be the way forward for the Tata Group?
A: I should imagine it will go up in the coming years. There has been collaboration and cooperation amongst select Tata companies. It has increased in pace in the last few years, but the Chairman's view is we can do much more and therefore, put in place processes and structures for that to happen. Therefore, if we were to take a simple example – I am not even saying that is something that we are working on – but at least three companies are in retail and retail is about space. If you negotiate together, while the companies go about their businesses on their own, you can get benefits of cooperation and collaboration. So there are things like that which you need a structure and a process, so I believe that can happen.
Q: Talking about structures and processes, when you look at the different consumer businesses under the Tata Group, there is always, many of the businesses may not perhaps be a market leader in that segment. Of course, they have established their own identity. But considering that if at all, these businesses collaborate together and work together with the structure and process in place, do you think that this could become a one stop shop or sort of mega consumer conglomerate as we speak, going ahead?
A: I do not think that leadership comes out of just collaboration. It is an enabler for business excellence and certainly, more efficiency, greater efficiency, greater negotiating power, but scale and leadership comes out of other things, it comes out of enterprise, which is ambitions, having a scale of ambition.
Q: But speaking specifically about Titan, the company that you have nurtured over the last more than 30 years of course, at this point in time, it has USD 2 billion as far as revenues are concerned at the end of FY17 and I just wanted to understand at this point of time, you said Rs 15,000 crore is the kind of revenue scalability that you can expect by FY18. But, when can we expect a USD 5 billion kind of number as far as revenues are concerned? Is there a roadmap that you have laid out in terms of 2020-2025 at Titan?
A: USD 5 billion is a long way off. It is a very large number. But it is not too far out as well. We do not have a roadmap for a USD 5 billion number. But let me give you a few nuances. Our jewellery business scaling up by 2.5 times by 2022 is one path. Watches, similarly, more than doubling itself in five years is another path. These are two different industries. When you add those up, you get a number. The current construct of the watch industry would mean our growth would be limited. But then, we have to think out of the box and see how we can redefine ourselves. I should imagine that the USD 5 billion dream can be achieved. It may take seven years. It could take five years because we have the GST effect on all our businesses. So, if you take today, our turnover is, we closed Rs 13,000 crore, Rs 15,000 crore, so USD 5 billion is like Rs 32,000-35,000 crore.
Q: So would 2025 be a reasonable timeframe to take?
A: I think so. If we are not Rs 35,000 crore by 2025, we would not be doing a good job.
Q: Even your margins, looking at the quarterly numbers, have hit a multi-quarter high at 11.5 percent. I wanted to understand, is that a trajectory that you could look at?
A: No, that is not all of it. Yes, margin improvement is happening in all our businesses. We are investing in growth and therefore, that kind of margin improvement that you saw, will not happen, but it will be more steady.
Q: So what is the range that you are looking at?
A: We have targeted 10 percent across all our businesses and typically, jewellery has already hit 10 percent which was not the case a few years ago and it was one of the objective was to hit the 10 percent. But now, sequential increase, but not necessarily going up significantly because we are investing in the wedding market which is in a way, EBITDA depleting or EBIT depleting. Watches on the other hand was at a high in the past, about six years back and had dropped, but now is going back to its legitimate position which is between 10 and 14 percent. It had dropped below 10 percent. But that 10-14 percent will not happen very soon because it all depends on what growth we can achieve.
Q: I wanted to speak to you specifically about the jewellery business, about three-fourth or over 70 percent of your revenues comes from the jewellery business. Of course, through the year, we have seen lots of regulation also. At this point in time, considering that a bulk of your revenues comes from the jewellery business, do you think Titan has over-bet on jewellery business at this point in time and of course, is looking at derisking the portfolio?
A: Not at all. We do not think about it that way. The way we are structured, we have three large independent verticals, jewellery of course, is very large. And we have a new business within the lifestyle, new business division. So, none of these businesses has been starved of resources or cash and jewellery being large is being large by itself. So that does not risk the company because the interrelationships are very few because the people, the stores, the brands, they are all different.
Q: Titan has also embarked on a journey of merging Gold Plus with Tanishq and that was when exercises primarily done for cost optimisation as well as rationalisation and other strategies that you have on board. Has this exercise been completed as we speak and is there more optimisation in terms of cost or rationalisation that we can see going ahead in the jewellery business?
A: When we introduced Gold Plus more than 10 years back, the markets in semi-urban India, our consumers in semi-urban India bought jewellery largely for investments and less for adornment. Over the last 10 years, this has been a trend in India, the aspirations of the people are merging, whether you are in urban India, semi urban, rural, thanks to television and all the other things, social media and such. So, when the aspirations merge, then a single brand can serve both the physically located semi urban India as well as metro Indian. Therefore, we decided to convert the Gold Plus stores into Tanishq.
Q: So that exercise has been completed?
A: Yes, by and large complete. Only one or two yet left.
Q: If you look at the store openings on the jewellery businesses, we have seen only five new stores as of now and the remaining have been the merger of Gold Plus as well as Tanishq. Can we expect this pace to pick up?
A: Yes, there has been a lot of openings in the last few months and yes, the pace will pick up. But it is not because of any market force. It is only because it takes time to locate property, suitable property. So today our effort is to go to unrepresented areas and new towns and some underrepresented areas in large towns. So representation in the large towns is quite strong. It is only to add to your sale that you look for a new location. We do not find a good enough location, we will not open.
Q: Can we look at about 500 stores by 2025 considering the kind of targets that you have set out for yourself?
A: Yes, I think so. By 2025, we should be adding about 25 stores a year for the next three years. Thereafter it will slowdown, but from the current 220 odd to grow to 300 in three years' time. But five years, 500, that is a possibility.
Q: So it could be possible 500 stores by 2025?
A: I am excluding in this, Mia and Caratlane, both these are brands of ours.
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