'Elephant can dance': Tata poised to gain market share in digital space, says JM Financial

Salt-to-software conglomerate Tata group is poised to "gain market share" in the digital space, said JM Financial in a report released on June 3.

The report, titled as "Tata Digital: Elephant can dance", stressed on how the digital arm of Tata is "orchestrating digital transformation of individual consumer businesses to complement the digital front-end".

Tata Neu, the recently launched online shopping app, is "emblematic of this transformation" across Tata’s consumer brands, it claimed.

Based on the gross merchandise value (GMV) of key categories on Tata Neu, JM Financial believes the value of Tata Digital "could be upwards of $15 billion".

Tata Neu, it added, is not just a unified digital gateway to bring the group’s various brands and their consumers onto one platform. "It has also spurred these brands to transform themselves to be 'Neu ready'. Tata Digital is at the fulcrum of this transformation, forging collaboration within group companies to leverage in-house technological know-how and plugging portfolio gaps through bolt-on acquisitions," the investment banking firm said.

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In India’s already crowded e-commerce space, Tata Neu’s "wide coverage" and "leadership in key categories" should help it gain market share, the report added.

The presence of a large player like Tata in the digital space "will accelerate market consolidation in favour of larger players", it claimed.

JM Financial said it sees higher deal activity by larger players to acquire niche players in the e-commerce and e-commerce enabler segments to maintain their leadership position.

"While Tata is ticking all the right boxes in their digital shift, the mere enormity of this transition makes this an audacious endeavour. Drawing lessons from Walmart’s pivot to e-commerce, we believe Tata will need sustained investments in this space to succeed," it further noted.

The JM Financial report was released a day after brokerage firm Emkay Global Financial Services described Life Insurance Corporation (LIC) of India as an "elephant that can’t dance", as it believes that the attractive valuation of the state-run insurer is more optical than fundamental.