With consumer spending slowing down in India, the Tata Group has decided not to pursue any big-ticket acquisition while it focuses on reducing debt and improving the performance of group companies.
The salt-to-software conglomerate last year acquired ailing Bhushan Steel, a maker of auto-grade steel, and Usha Martin Ltd, a leading producer of specialty steel.
Tata Sons chairman Natarajan Chandrasekaran now wants the group companies to aim for organic growth and boost their presence in the domestic Indian market.
A keen marathon runner, he is known to use analogies related to running. He remarked, “You have to fix the heart rate, pace, and posture. Without that, you will finish the marathon somehow, but you will not enjoy the journey,” a Tata official told Business Standard.
Tata Group has more than 1,000 subsidiaries, owned by its more than 100 operating companies, and it is in the process of shrinking the number. Each operating company has around a dozen subsidiaries and one of them has 33. In the first phase, it wants to bring down the number of subsidiaries and later work toward reducing the number of operating companies.
Under Chandrasekaran, Tata has exited the mobile telephony business in favor of Sunil Mittal’s Bharti Airtel. He has also been instrumental in tackling the cross-holdings within the Tata Group’s listed companies. Thus Tata Power shed its Tata Communications stake and Tata Chemicals has shed its stake in Tata Global Beverages.
The Tata Group reportedly has a consolidated debt of around 2.77 trillion rupees (US$39.68 billion) and a major chunk is from Tata Steel, Tata Motors and Tata Power. Tata Steel had a debt of 1.19 trillion rupees ($17.05 billion) by the end of the September 2018 quarter, but reduced it to 1 trillion rupees ($14.32 billion) in the March 2019 quarter. The company aims to bring it down to 700 billion rupees ($10.03 billion) over the next five years.
Tata Power has a debt of 450 billion rupees ($6.45 billion) and it is trying to bring it down by shutting its plants in South Africa and Zambia in this financial year.
Tata Motors has a debt of 911.24 billion rupees ($13.05 billion), mainly on account of its UK-based unit Jaguar Land Rover woes. While its commercial-vehicle and passenger-car business in India is bringing in positive cash flow, Jaguar Land Rover’s has been negative on account of uncertainties related to Brexit and slowing sales in China.