As per a report by The Mint Tata Sons chairman N. Chandrasekaran is planning to consolidate group firms to weed out duplication and increase efficiency, two Tata group executives said. Tata group over the years has grown into many businesses that range from checmicals and fertilizers to auto components and therapeutics over the last 110 years. Of all theses business some are doing well, some are not and some are doing the same work.
The executives spoke on condition of anonymity to The Mint “A lot of things are going to be looked at in the group from the point of view of profitability and performance,” the executive said. However, these are not the big companies of the group such as a Tata Motors Ltd or Tata Steel Ltd. These are mostly subsidiaries of flagship firms that make contribute little to revenue and profits.
Chandrasekaran is looking to merge multiple firms that are in similar segment. “There can’t be multiple companies in the same segment, like Tata Finance, Tata Housing Finance, Tata Capital Finance—all may merge and become one entity,” Mint quoted another executive.
Divesting or exiting non-core businesses has been on the agenda of the group’s boardroom meetings for a while. At a previous held meeting an independent director on the Tata Sons board, Ajay Piramal had recommended forming a separate team to work on the divestment strategy. In that sense, Chandrasekaran, who took charge on 21 February, is picking up from where Mistry left.
“These have been identified earlier, but Chandra (Chandrasekaran) has been moving in a very aggressive way,” said the first person cited above. “There will be a rationalization of portfolio of all the big companies, including Tata Steel Ltd, Tata Power Co. Ltd, Tata Chemicals Ltd. The structure will not be the same as today, they will either be merged or exited from completely.”
Since chandrasekaran has taken over as the chairman of the Tata Group, his first 100 days have been action packed. Market capitalization of 27 listed Tata firms that had dropped 1.3% to Rs8.6 trillion from Rs8.71 trillion from 24 October 2016—when former chairman Mistry was shown the door—to 20 February 2017, started picking up from the day Chandrasekaran took charge. Since then, market cap has risen 1.6% to Rs8.74 trillion from Rs8.6 trillion.
Chandrasekaran has taken up keen interest in the idea of forming a team to work on the divestment strategy. Last month Saurabh Agarwal was hired, he was the head of the strategy at the Aditya Birla Group he was hired as the group chief financial officer (CFO) of Tata Sons. Agarwal is the second recruitment of such type. Clearly pointing out at the strategy that the group is trying to bring into play.