Tata’s recharge mission must sharpen a key edge
PremiumAs a conglomerate, Tata Group must make the most of its resource reach as it goes in for a big rejig to simplify its sprawl and watch out for pitfalls as it aims to synergize and scale
Dear Tata, it feels awkward to address a brand directly, but it’s really just the name in which most of us are invested. Not financially as shareholders, though a few of us own Tata equity too, but in various other ways as stakeholders, towards whom you showed your responsibility in India a whole century or more before the US Business Roundtable declared that enriching owners was only one purpose of a business among many others. This letter was provoked by Tiago, an electric vehicle (EV) offered by Tata Motors for under ₹10 lakh. If this launch cracks open a mass market for EVs, lures rivals to chase its lead on value-for-money and cruises alongside a clean-up of India’s power grid, consider this an advance expression of thanks. As we learnt from Nano’s failure, though, success takes a feel for the market pulse that goes well beyond a gap revealed by an analysis of household budgets. What Nano needed was sufficient engine power to keep up with two-wheeler traffic, at the very least, not the mere promise of cabin comfort by virtue of four wheels, let alone fame for its cheapness. This time, your EV market pitch seems well within your control, with Tata’s leadership clear and roadmap impressive. With digital technology now steering the future of mobility, your special edge of in-house input diversity should get a chance to shine. The potential in blended R&D talent—say, from Jaguar, TCS and Tata Motors—was partly why a buzz around ‘core competence’ did not shake your confidence as a conglomerate, was it not?
An over-sprawl across markets was identified as a major Tata weakness, and while a sort-out has gained pace and clarity, with “simplify, synergize and scale" as the mantra of a structural rejig, the less diversified but more capital-plied Adani has taken away pole position as India’s most valuable group by market capitalization. To stay in this race, you have so much to do so fast that you must proceed carefully, lest a Tata merger spree ends up as an account-book job more than a strategic makeover to orient skills towards markets at optimal cost. As reported, 29 listed firms will be whittled down to half, with scores of unlisted firms and subsidiaries folded in. Synergies and cost savings are expected to unlock value all across. A simpler dashboard may also help superior allocations of capital extract higher returns. To achieve its fitness goal, Tata Steel, for example, will roll in six business units and an associate firm to complete a snap-in or snuff-out drive that began in 2019 and snuffed out 116 small entities. Earlier this year, you made another move to consolidate consumer-facing businesses. Whatever the numbers say, your stakeholders would hope that famed ‘Tata values’ will keep all group mergers organic and free of upheavals set off by any shifts in autonomy across the empire. Every power rebalance is an experiment in its own right. And once your e-com ‘super-app’ starts reaching out to customers online, your will to devour your own would only be tested further.
Remember, your success as a business group will also be judged by the ‘aerodynamism’ you show in aviation, where Tata air carriers willy-nilly bear your group prestige (if not logo). Proposals of a two-stage merger, with a prospective Air India union with Vistara seen as best placed to purchase a combine of AirAsia India and Air India Express, have been in the air for you and your partner Singapore Airlines. Here too, a blend of inputs could enrich your decisions.
Sincerely, just another stakeholder.
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