Tata Group- Diversification
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How values have driven growth and successful diversification for the Tata group for over 100 years
Transcript of Tata Group- Diversification
Dr Amit R
angnekar
Tata Group-Tata Group- Values drive Growth
Values drive Growth
Dr Amit Rangnekar
Dr Amit Rangnekar
Dr Amit R
angnekar
Tata Group 2008 (1868)• Always aligned biz with nation building & values• India’s biggest private group, most respected, 3% GDP• Sales- $50 bn (incl Corus & JLR), $29 bn excl• Tata Steel + Tata Motors + TCS= 75% of sales• 98 companies, 3 Lakh employees • Total market cap $66b ($12bn in 2003) India’s highest • 27 listed firms, 3mn Shareholders• Operations- 80+ countries, exports- 85 countries.• 5 core values: integrity, understanding, excellence, unity
and responsibility- enshrined since inception
Dr Amit R
angnekar
7 sectors: engineering, materials, services, information systems,
Engineering
Energy & communications
Consumer products
Chemicals
Information systems
MaterialsServices
Tata’s
Dr Amit R
angnekar
Tatas• Founder- Jamshetjee Tata- 1868, Trading• 1903- Taj, Mumbai- Luxury Hotels • 1907- Tata Steel- Asia’s 1st steel plant• 1910- Tata power- Hydro Power• 1932- Tata Airlines- Civil Aviation• 1968- TCS- Software• 1998- Tata Indica• 2008- Tata Nano- World’s cheapest car
At Tata’s, we have retained the fire of idealism and in its glow we have come to recognise that no wealth or power can be more valuable than our dignity; no loss of profit can be more critical than the loss of our credibility; no skills or qualifications can substitute the integrity of our character- JRD Tata
Dr Amit R
angnekar
Other firsts
Industrial• 1912- 8 hour work day• 1915- Free Medical Aid• 1917- Free Schooling• 1920- Paid Leave, PF
Educational• Foreign scholarships• IIS, Bangalore• TISS, TIFR, NCPA• Tata Memorial Hosp
2008 Trust Grants- 300 crores
Dr Amit R
angnekar
• Group HQ 1926• Trusts & holding Co.s• 9 Board Members• Provide strategic vision• Control Tata brand• Big Deals• Mentor managers• Perspective• Promote values & CSR
Bombay
House
Dr Amit R
angnekar
Tata Sons Board
N Soonawala
Vice Chairman
RK Krishna KumarDirector
JJ IraniDirector
TQMArun Gandhi
Exec DirectorM&A, Tax
Alan Rosling
Exec Director
International R Gopalakrishnan Exec Director
Brand, HR
Ishaat HussainFin Director
Finance, Legal
KA Chauka
r
MD Tata Inds
New business
Ratan TataChairmanTata Sons
Dr Amit R
angnekar
Sir Dorabji Tata Trust + Sir Ratan Tata Trust + Other Tata Trusts
•TCS•Tata Steel•Tata Motors•Tat Power•VSNL•Tata Chemicals•Tata Tea•Indian Hotels•Tata Infotech
•Tata Advanced Materials•Idea Cellular•Tata Teleservices•Information Tech Park•Tata Autocomp Systems
•Titan•Voltas•Tata Elxsi•Trent•Rallis•Tata Investment•Tata Teleservices•Tata International
Tata Sons (1868)(Major Holdings)
Tata Industries (1945)(Major Holdings)
66% shareholding
29% shareholding
Promoter of all Tata companies
Dr Amit R
angnekar
led Tatas from
1938 to 1991 (200cr to10600cr) 53 years
leads Tatas since 1992
till date (10600+ cr
to (200,000 cr)
JRD RNT
Dr Amit R
angnekar
Ratan Tata
• Born December 28, 1937• School- Campion, Mumbai• US- Age 15, for further studies• Degree- Arch & Structural Engg- Cornell• AMP- Harvard Business School. • Joined Tata Group, 1962• Director in Charge- Nelco 1971-94• Chairman Tata Steel- 1977…• Chairman Tata Motors, Industries- 1981…• Chairman Tata Sons, Tea- 1991…• Chairman VSNL- 2002-2005• Chairman 1991- As India liberalised
Dr Amit R
angnekar
RNT Restructuring 1992
Pare group companies to 12Transform group revenues, retain values
Ease out satraps, from fiefdoms
CosmeticsPaints
OilSoaps
PharmaCement
RetailTelecomBiotech
Technology
SteelMotors
ChemicalsPower
Exit Marginal biz
Enter Potential biz
Build Core biz
Dr Amit R
angnekar
Tata Motors (1945)
• India’s largest auto company- 32500 cr, 1 trucks, 2 cars• World- 5th M&H CV maker, 2nd M&H Bus maker• 1999- Indica (UK, SA, Spain & Italy) • M&A- Daewoo's truck business, 465 cr, 2004• “We acquired Daewoo as we saw an opportunity in an entity that
had a certain market share, that had a product line that we did not have, and that was a strategic fit for us. We brought in our marketing reach and made the company more profitable.” RNT
• 2005- Ace mini-truck < Rs 3L, hit, 250,000 units• Fiat JV- India, South America- cars & trucks• Plants- Pune, Jamshedpur, Lucknow, Pantnagar, Singur• 2,000 touch points
Dr Amit R
angnekar
Ace Ad
The success of Tata Ace, a 4-wheeler, in a market dominated by
3-wheeler load carriers, was due to a deep understanding of the market needs
and customer requirements.
Dr Amit R
angnekar
Nano- 2008
•World's ULCC•Set to revolutionise Indian car market•Global implications•Huge export potential
Dr Amit R
angnekar
Innovation
• 1998- Tata Safari, India’s 1st SUV• 1999- Indica, India’s 1st fully indigenous car• 2005- Ace, sub-1Ton CV, new segment• “Innovation is primarily implementing a new idea to give the
company a competitive edge, in all aspects of the value chain“ Kant
• “I can’t think of any other product or service which has built up such a strong brand without spending money. Within 24 hours of the launch, the Nano website had four million hits. Now that’s a hit.” Kant.
•
Dr Amit R
angnekar
Jaguar-Land Rover M&A• Marquee brands acquired from Ford• Apr08- $2.3 billion• Access to premium markets• SUV global entry• Distribution set-up for Tata Motors• Unique- Worlds cheapest (Nano), most rugged (Land
Rover) & costliest (Jaguar)
Dr Amit R
angnekar
Tata Chemicals (1939)
• Rs 5,800 cr• Tata Salt- India's largest salt
brand• 2005- M&A Brunner Mond
UK, 526 cr• 2008- M&A General
Chemicals US, 4020 cr• Global No.2 soda ash
producer • Fertilisers
Dr Amit R
angnekar
Indian Hotels (1903)
• 1903- Taj Mahal Hotel, Mumbai • 1974- 1st Intl beach resort- Aguada, Goa• 2008- Rs 2600 Cr, India's largest-• 10500 rooms, 88 hotels, India 72, 12 nations• 16% share of organised hotel sector • M&A 2005- The Pierre (New York) 202 Cr• 2005- The Ritz Carlton (Boston)• 2007- Campton Palace, San Francisco 235 Cr• Taj Air- luxury private jets & luxury yachts• Expansion Rs 2100 crores over N3-4Y• 147 hotels, 20000 rooms
Taj Palaces- Luxury
Taj Resorts- Leisure
Taj Residency- Business
Ginger- Budget
Dr Amit R
angnekar
Tata Teleservices (1995)• 6000 cr• M&A Hughes Telecom in 2001• Largest retail chain, 5,000 outlets • India's 2nd largest CDMA mobile-phone &• Early CDMA entrant, but distant second (25 mn
subscribers) to Reliance (45 mn)• Excellent response in L2Y• Tata Indicom- broadband & wireless service
provider• Alliance- Virgin Mobile, target India's fast-growing
youth market
Dr Amit R
angnekar
Tata Power (1911)
• 6000 cr• India's largest private-sector power generator• 2,300 mw installed base• Secret of Mumbai’s superb power situation• Expansion- invest $4 bn, double capacity 4500 mw• Building power plants in Arabia, Africa & Asia• 30% stake in PT Koltim, Indonesia – to acquire coal
deposits
Dr Amit R
angnekar
Tata Steel (1907)• “In the early '90s, Tata Steel was saddled with antiquated plants, bloated
payroll & no market orientation. . . we were a good study in demise" Muthuraman
• Mid-90s, slashed workforce from 78,000 to 38,000• Early retiring workers- full pay till 60, lifelong health care• Jamshedpur- Spend $40mn/year supply all civic services & schools
but employ only 20,000 of 700,000 residents
• Spent $2.5 billion on modernization• M&A NatSteel Singapore (2004) 1282 cr• M&A Millennium Thailand (2005) 1818 cr
• 2008- 23000 cr, nimble player, Key group dynamo• One of the world's lowest cost producers of steel• Triple capacity to 15 million metric tons by 2010
Dr Amit R
angnekar
Corus Acquisition 2007• M&A- Corus (UK-Dutch) steelmaker $12bn• Global No.5• Asia, Middle East, Europe & Africa• Focus on high-value specialized steels- automobiles• $7.4 billion debt? Lay offs? High-cost ops? Margins?
Use own RM
Makelow cost
raw steel
Ship to
Corus
Finish goods at
Corus plants
Earnhigher Margins
Strategy
Dr Amit R
angnekar
Tata Tea (1950)
• JV- James Finlay, UK• 1980s- From commodity player to branded tea producer• Operate 54 tea estates in India• Industry- rising inputs, shrinking margins, MNC• M&A- Tetley UK (2000) 1831 cr• Rationale- Tata plantations + Tetley’s global reach • M&A- Good Earth Tea (US) 144cr, JEMCA(Czech) 100cr,
Eight O' Clock coffee (US) 990 cr • M&A- Himalayan Mineral water- Premium, at source• Glaceau- M&A, sold in 9 months to Coke- $400 mn profit • Now- Build Tata Tea brand, NPL, exit tea plantation biz• Overtook HUL in beverage volumes in 2007 in India
Dr Amit R
angnekar
Tata BP Solar• $260 million JV- BP (UK)• Renewable energy- Solar power, home & street lighting• Exporting solar cells, modules, and power systems• Germany- Rooftop solar-electric systems for buildings • EMs- Bring affordable power to villages not in power grid • Low-cost, solar-powered water pumps, refrigerators, &
Rs 1200 lanterns that burn for 2 hours on charging• Fitted 50,000 homes with Rs 12000 systems that can
power 2 lights, a hot plate, a fan, and 14-inch TV• “This is a drop in the ocean, we ought to be touching
millions" Tata BP Solar CEO K. Subramanya
Dr Amit R
angnekar
TCS (1968)• India's oldest & Asia's largest software firm• $4.3 bn, 1 lakh+ employees • Major home player, unlike most others• 2004- 10% equity, IPO raised $1.3 billion• Poised to tap outsourcing boom & growing geographies • Gen-next IT products- Transportation, retail, finance, • M&A to extend geographic reach- TKS 360 cr Technosoft• Software for Fiat, Ferrari F1, Iveco, CNH
Dr Amit R
angnekar
Titan (1984)
• JV- TIDCO, introduced India to quartz• Rare Indian company to acquire collaborator, Ebauches • JV- Timex, discontinued 1998 • 2008- Sales 3041cr, Profit 150cr, 60% MS, 12000 outlets• Global No. 6, India’s largest, 9mn watches, 30 countries• Began ‘watches as gifts’, Psychographic segmentation• Titan, Edge, Raga, Heritage, Wall Street, Regalia,
Classique, Royale, Aviator, Nebula, Octane, Fastrack • Market Xylys, Tommy Hilfiger & Hugo Boss • Sonata, India's largest selling watch brand• Tanishq (1994)- India's largest jewellery brand Rs 2000 cr• Jewellery (66%), Watches (31%), Others (3%)
sunglasses, Rx eye wear, precision components
Dr Amit R
angnekar
Voltas (1954)
•2400 cr•AC & Engg-services
•Turnaround•Tapping AC boom in malls,
offices, residences•Middle East major- Bahrain
City Centre, Royal Palaces & Burj Dubai Tower- world's
tallest building
Dr Amit R
angnekar
Trent (1998)• 632 cr, Retail foray• 3 formats• Westside- 29 lifestyle dept stores,17 cities• Star Bazaar- Hypermarket (3)• Landmark- Books & Music (10)• Target- Indian middle-class• Indian franchisee-Sisley’s (3) • Run by Noel Tata
Dr Amit R
angnekar
Infiniti Retail (2006)
• 100% subsidiary of Tata Sons
• Croma- consumer durables & electronics
• 21 large stores (15-20,000 sq ft each)
• 6000 products, 8 categories, 200 brands
• World class in-store experience
• Woolworths (Australia)- technical support & strategic sourcing
Dr Amit R
angnekar
•7200 cr•Global thro’ M&A•VSNL (2002)•Tyco (‘04) 585 cr•TeleGlobe (2005) 1075 cr•Global voice and data services leader•India's top ISP & intl wholesale voice carrier•2008- India WiMax rollout, worlds largest
Tata Communications (2002)
Dr Amit R
angnekar
Other Tata Firms
Firm EstdSales
Cr Sector Business
Autocomponent Sys 1995 2600 Engineering Autocomponents
Tata International 1962 2300 Materials Leather Exports
Tata Asset Mgt 2000 2100 Finance Financial planning
Telco Construction Equip 1998 1617 Engineering JV Hitachi- Earthmovers
Tata Technologies 1994 961 IT Auto /Aerospace Design
Tata Projects 1979 938 Engineering Engineering , Construction
Rallis 1948 702 Chemicals Agrochemicals
Tata Elxsi 1989 308 IT Product design
Tata Business Support 2004 145 IT BPO
Tata Interactive 1990 93 IT Custom e-learning
Tata Sky 2001 Comm DTH Satellite TV
Tata AIG 2000 Finance Insurance Premium 2100cr
Advinus 2005 Chemicals Drug discovery
Dr Amit R
angnekar
Strategy MixYear Strategy Motive
90s Divest businesses Beauty, Pharma, Oil, Soaps- Focus
1998 NPD Indica Passenger car entry, indigenous
2003 M&A Daewoo trucks (SK) Chinese market & small truck segment entry
2003 Strategic stake Indonesian coal mine, SE Asian steel mills
00s M&A- Hotels in US Consolidate, enter premium segment
2004 M&A Tyco Intl- $130 mn (Undersea telecom cables)
Tata, one of the world's biggest carrier of international phone calls
2004 M&A Incat International (UK), $91 million
Tata Tech- major outsourced industrial design supplier for US auto & aerospace
2007 M&A Corus $13 bn, UK Scale, range, access to global automakers
2007 Divest Glaceau to Coke Tata Tea made $523mn profit in 9 months
2008 M&A Ford's JLR brands Global auto map, distribution setup, SUV
2008 NPD Nano ULC car, redefined global auto dynamics
Dr Amit R
angnekar
Diversification Synergies
HotelsPower
FinanceAutomobile
Consumer
Retail
Steel
IT
Voltas
TelecomSynergy
Dr Amit R
angnekar
Shareholding in Group firms
• 2002- Fortify promoter holdings in group firms to ward off predators
• Huge funds involved, but critical
• Creeping acquisitions (5-10% pa)
• Crossholdings in group firms• Tata Steel • 4%(1970s)• 18%(2000) • 27%(2002)
Firm Holding
Tata Steel 27%
Tata Motors 34%
Tata Coffee 51%
Tata Chem 29%
Tata Power 32%
Tata Tea 29%
Tata Elxsi 38%
Trent 27%
Voltas 26%BSE 31 Mar 2006
Dr Amit R
angnekar
Growth strategies in a globalizing economy
“ We have 2 guiding arrows. One points overseas, where we want to expand markets for our existing products. The other points to India, where we want to explore the emerging large mass market- not by following but by breaking new ground in product development and seeing how we can do something that hasn’t been done before.”
“ We expand into geographies where we can have a meaningful group presence, and where we could make an impact and participate, in that country’s development, as in India. When you visit a country or examine a company, you intuitively know if there’s an opportunity, and then you flesh out that opportunity in one form or other.”
Dr Amit R
angnekar
Domestic Expansion
• N5Y outlined $28 billion capital investments• Steel• Auto• Telecom• Power• Chemicals• Technology
Dr Amit R
angnekar
The RNT era• Rocky first decade as chairman• Commissioned sweeping review to plot strategy• Eased out group veterans• Focus- emerging businesses, technology, geographies• Unorthodox group structure• Agile, individual companies to respond to new
opportunities and threats• "We rescaled our thinking in terms of growth. We just
forced and cajoled our businesses to make this happen”
Dr Amit R
angnekar
Key issues• Successor, with values & CSR• Tata family members own just 3% shares in Tata Sons• Building coherent vision, retaining diverse focus• Cases- Daewoo (South Korea), Charoen Pokphand
(Thailand) & Salim Group (Indonesia)• Compete in developed and developing markets• In tough times- growth, retain talent, value system &
ethics• CSR initiatives- tempting targets for cuts
Dr Amit R
angnekar
Market Cap (‘000 Cr)
129
221239
268
2005 2006 2007 2008
5% of BSE M-Cap
Dr Amit R
angnekar
Sectoral Contribution %
Sales PAT Exports HR Key Firm
% % % %
Services 7 18 6 10 Taj Hotels
Materials 21 34 9 18 Tata Steel
Engineering 31 21 14 14 Tata Motors
Energy 6 6 2 2 Tata Power
Consumer 5 5 1 16 Titan
Chemicals 5 5 1 2 Tata Chemicals
Info & Comm 25 11 67 38 TCS
Dr Amit R
angnekar
Top 12 Firms (2006-07)
Firm Estd Sales Cr % Contr Sector
Tata Motors 1945 30000 26 Engineering
Tata Steel 1907 23000 20 Materials
TCS 1968 17000 15 IT
Tata Communications 2002 7200 6 Communications
Tata Teleservices 1995 6000 5 Communications
Tata Power 1911 6000 5 Energy
Tata Chemicals 1939 5200 4.5 Chemicals
Titan 1984 2800 2.5 Consumer
Autocomponent Systems 1995 2600 2 Engineering
Taj Hotels 1903 2600 2 Services
Voltas 1954 2400 2 Engineering
Tata International 1962 2300 2 International
92
Dr Amit R
angnekar
How Do they Innovate• Global innovation- think, aspire & experiment• Tetley- beverage-dispensing machine without electricity• Tata Chemicals- bio-fuels & ethanol from biowaste• TCS - academia (Stanford & MIT) interaction • Ginger Hotels- Profitable from year1 • Innometer- thermometer to gauge degree of innovation
at every Tata company• R&D teams across the Tata universe share learnings• “We don’t believe that what we are doing is innovative. It
is just a part of the day’s work”
Dr Amit R
angnekar
References• http://images.businessweek.com/ss/08/03/0312_tata/ind
ex_01.htm?campaign_id=rediff• http://www.rediff.com/money/2007/dec/28sld1.htm• http://images.businessweek.com/ss/07/08/0802_tata/ind
ex_01.htm?campaign_id=rediff• Ratan Tata: India's shining jewel
Pete Engardio, BusinessWeek• Business World Jan, 2008• Business Today Jan, 2008• Mckinsey Quarterly- Interview 2005
Dr Amit R
angnekar• “Tatas understand the Indian consumer
and have a passion for growing India. The Tata Group has always been professionally run and has paid attention to building very high intellectual capital and has the financial strength to mount big, audacious and innovative projects” V Govindrajan
