Tata Group - Diversification

a r
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Gr ow t h
ou p- V alu es
a
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n
Ta ta Gr
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A m
D r mit R a n gn e k a r
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amitrangnekar@gmail.com
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Tata Group 2008 (1868)
• Always aligned biz with nation building & values
•
r
India’s biggest private group, most respected, 3% GDP
a
k
• Sales- $50 bn (incl Corus & JLR), $29 bn excl
•
•
ne
Tata Steel + Tata Motors + TCS= 75% of sales
98 companies, 3 Lakh employees
•
ng
Total market cap $66b ($12bn in 2003) India’s highest
•
•
Ra
27 listed firms, 3mn Shareholders
Operations- 80+ countries, exports- 85 countries.
•
it
5 core values: integrity, understanding, excellence, unity
m
and responsibility- enshrined since inception
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Dr amitrangnekar@gmail.com
7 sectors: engineering, materials,
services, information systems,
Engineering
a r
Services Materials
e k
g n
a n Information
R
Energy & Tata’s
t
systems
i
communications
A m
Dr Consumer
products
Chemicals
Tatas
• Founder- Jamshetjee Tata- 1868, Trading
• 1903- Taj, Mumbai- Luxury Hotels
•
a r
1907- Tata Steel- Asia’s 1st steel plant
k
• 1910- Tata power- Hydro Power
•
• 1968- TCS- Software
ne
1932- Tata Airlines- Civil Aviation
• 1998- Tata Indica
ng
a
• 2008- Tata Nano- World’s cheapest car
it R
A m
At Tata’s, we have retained the fire of idealism and in its glow we have
r
come to recognise that no wealth or power can be more valuable than
D
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
Other firsts
Industrial Educational
• 1912- 8 hour work day • Foreign scholarships
• 1915- Free Medical Aid
a r • IIS, Bangalore
• 1917- Free Schooling
e k • TISS, TIFR, NCPA
• 1920- Paid Leave, PF
g n • Tata Memorial Hosp
a n
it R
2008 Trust Grants-
A m 300 crores
Bombay
House
a r
e k
g n
a n • Group HQ 1926
• Trusts & holding Co.s
it R • 9 Board Members
• Provide strategic vision
m
• Control Tata brand
r A • Big Deals
• Mentor managers
D • Perspective
• Promote values & CSR
Tata Sons Board
JJ Irani
RK Krishna Kumar
Director
Director
r
TQM
a
Aru
k
Ex n Ga
la ec
e
aw a D n dh
o on an M & i r ec i
n
N S airm A, t
Ch Ta or
g
Vice x
n
Ratan Tata
Ra Chairman
Tata Sons
t
Ala
Ex n Ro
e
In c Di sling
t er
na recto
mi h
k ar
au Inds
C ta ess
A
tio KA Ta sin
na r
r
u
l R Gopalakrishnan Ishaat Hussain MD w b
Ne
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Exec Director Fin Director
Brand, HR Finance, Legal
Sir Dorabji Tata Trust + Sir Ratan Tata Trust + Other Tata Trusts
66% shareholding
29%
Tata Sons (1868) shareholding
r
(Major Holdings)
Promoter of all Tata companies
ka Tata Industries (1945)
e
(Major Holdings)
•TCS •Titan
g n
•Tata Steel
•Tata Motors
a n
•Voltas
•Tata Elxsi •Tata Advanced Materia
•Tat Power
•VSNL t R
•Trent
i
•Rallis
•Idea Cellular
•Tata Teleservices
•Tata Chemicals
A m•Tata Investment•Information Tech Park
•Tata Autocomp System
r
•Tata Tea •Tata Teleservices
D
•Indian Hotels •Tata International
•Tata Infotech
JRD RNT
led leads Tatas
Tatas from since 1992
1938 to 1991 till date
(200cr to (10600+ cr
10600cr)
a r to
k
53 years (200,000 cr)
ne
ng
Ra
it
A m
Ratan Tata
• Born December 28, 1937
• School- Campion, Mumbai
•
•
US- Age 15, for further studies
a r
k
Degree- Arch & Structural Engg- Cornell
•
• Joined Tata Group, 1962
ne
AMP- Harvard Business School.
•
ng
Director in Charge- Nelco 1971-94
•
•
Ra
Chairman Tata Steel- 1977…
Chairman Tata Motors, Industries- 1981…
•
it
Chairman Tata Sons, Tea- 1991…
•
•
A m
Chairman VSNL- 2002-2005
Chairman 1991- As India liberalised
RNT Restructuring 1992
Exit Enter Build
r
Marginal biz Potential biz Core biz
ka
e
Cosmetics Steel
Retail
Paints
Oil
g n
Telecom Motors
n Biotech Chemicals
a
Soaps Power
Technology
Pharma
Cement
it R
A m
Dr Pare group companies to 12
Transform group revenues, retain values
Ease outamitrangnekar@gmail.com
satraps, from fiefdoms
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
•
a r
1999- Indica (UK, SA, Spain & Italy)
•
• k
M&A- Daewoo's truck business, 465 cr, 2004
e
n
“We acquired Daewoo as we saw an opportunity in an entity that
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had a certain market share, that had a product line that we did
n
not have, and that was a strategic fit for us. We brought in our
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marketing reach and made the company more profitable.” RNT
R
t
• 2005- Ace mini-truck < Rs 3L, hit, 250,000 units
•
•
mi
Fiat JV- India, South America- cars & trucks
Plants- Pune, Jamshedpur, Lucknow, Pantnagar, Singur
•
r A
2,000 touch points
D amitrangnekar@gmail.com
Ace Magic
a r
e k
g n
a n
it R
A m
Ace Ad
r
The success of Tata
Ace, a 4-wheeler, in a
ka
market dominated by
ne
g
3-wheeler load
n
carriers, was due to a
a
R
deep understanding
it
of the market needs
A m
and customer
requirements.
Dr
•World's ULCC
Nano- •Set to revolutionise
Indian car market
2008 •Global implications
•Huge export potential
a r
e k
g n
a n
it R
A m
Innovation
• 1998- Tata Safari, India’s 1st SUV
•
r
1999- Indica, India’s 1st fully indigenous car
a
•
k
2005- Ace, sub-1Ton CV, new segment
e
n
• “Innovation is primarily implementing a new idea to give the
g
company a competitive edge, in all aspects of the value chain“
Kant
a n
• “I can’t think of any other product or service which has built up
t R
such a strong brand without spending money. Within 24 hours of
i
the launch, the Nano website had four million hits. Now that’s a
hit.” Kant.
A m
r
•
Jaguar-Land Rover M&A
• Marquee brands acquired from Ford
• Apr08- $2.3 billion
a r
• Access to premium markets
e k
n
• SUV global entry
•
ng
Distribution set-up for Tata Motors
•
a
Unique- Worlds cheapest (Nano), most rugged (Land
R
Rover) & costliest (Jaguar)
it
A m
Tata Chemicals (1939)
• Rs 5,800 cr
• Tata Salt- India's largest salt
a r
k
brand
• 2005- M&A Brunner Mond
UK, 526 cr
ne
• 2008- M&A General
ng
a
Chemicals US, 4020 cr
R
• Global No.2 soda ash
t
producer
• Fertilisers
mi
r A
Indian Hotels (1903)
Taj • 1903- Taj Mahal Hotel, Mumbai
r
Palaces- • 1974- 1st Intl beach resort- Aguada, Goa
Luxury •
ka
2008- Rs 2600 Cr, India's largest-
Taj •
e
10500 rooms, 88 hotels, India 72, 12 nations
n
g
Resorts- • 16% share of organised hotel sector
Leisure •
•
a n
M&A 2005- The Pierre (New York) 202 Cr
2005- The Ritz Carlton (Boston)
Taj
Residency-
•
•
it R
2007- Campton Palace, San Francisco 235 Cr
Taj Air- luxury private jets & luxury yachts
m
Business
• Expansion Rs 2100 crores over N3-4Y
Ginger-
r A
• 147 hotels, 20000 rooms
Budget
a r
e k
g n
a n
it R
A m
Tata Teleservices (1995)
• 6000 cr
• M&A Hughes Telecom in 2001
a r
k
• Largest retail chain, 5,000 outlets
•
•
ne
India's 2nd largest CDMA mobile-phone &
Early CDMA entrant, but distant second (25 mn
ng
subscribers) to Reliance (45 mn)
a
• Excellent response in L2Y
provider
it R
• Tata Indicom- broadband & wireless service
m
• Alliance- Virgin Mobile, target India's fast-growing
A
youth market
a r
e k
g n
a n
it R
A m
a r
e k
g n
a n
it R
A m
Tata Power (1911)
• 6000 cr
•
a r
India's largest private-sector power generator
• 2,300 mw installed base
e k
•
n
Secret of Mumbai’s superb power situation
g
n
• Expansion- invest $4 bn, double capacity 4500 mw
•
a
Building power plants in Arabia, Africa & Asia
R
t
• 30% stake in PT Koltim, Indonesia – to acquire coal
deposits
mi
r A
a r
e k
g n
a n
it R
A m
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
r
• Mid-90s, slashed workforce from 78,000 to 38,000
a
• Early retiring workers- full pay till 60, lifelong health care
e k
• Jamshedpur- Spend $40mn/year supply all civic services & schools but
employ only 20,000 of 700,000 residents
g n
• Spent $2.5 billion on modernization
a n
• M&A NatSteel Singapore (2004) 1282 cr
• M&A Millennium Thailand (2005) 1818 cr
it R
• 2008- 23000 cr, nimble player, Key group dynamo
m
• One of the world's lowest cost producers of steel
A
• Triple capacity to 15 million metric tons by 2010
a r
e k
g n
a n
it R
A m
Corus Acquisition 2007
• M&A- Corus (UK-Dutch) steelmaker $12bn
r
• Global No.5
•
a
Asia, Middle East, Europe & Africa
k
e
• Focus on high-value specialized steels- automobiles
•
n
$7.4 billion debt? Lay offs? High-cost ops? Margins?
g
n
Strategy
Ra
it Finish Earn
m
Make Ship
goods at higher
A
Use low cost to
Corus
r
own raw Corus Margins
D
RM plants
steel
Tata Tea (1950)
• JV- James Finlay, UK
a r
k
• 1980s- From commodity player to branded tea producer
e
• Operate 54 tea estates in India
•
•
g n
Industry- rising inputs, shrinking margins, MNC
M&A- Tetley UK (2000) 1831 cr
•
a n
Rationale- Tata plantations + Tetley’s global reach
M&A- Good Earth Tea (US) 144cr, JEMCA(Czech) 100cr, Eight O'
R
•
Clock coffee (US) 990 cr
•
it
M&A- Himalayan Mineral water- Premium, at source
m
• Glaceau- M&A, sold in 9 months to Coke- $400 mn profit
A
• Now- Build Tata Tea brand, NPL, exit tea plantation biz
r
• Overtook HUL in beverage volumes in 2007 in India
Tata BP Solar
• $260 million JV- BP (UK)
•
r
Renewable energy- Solar power, home & street lighting
a
k
• Exporting solar cells, modules, and power systems
•
e
Germany- Rooftop solar-electric systems for buildings
n
g
• EMs- Bring affordable power to villages not in power grid
•
n
Low-cost, solar-powered water pumps, refrigerators, &
a
Rs 1200 lanterns that burn for 2 hours on charging
t R
• Fitted 50,000 homes with Rs 12000 systems that can
i
power 2 lights, a hot plate, a fan, and 14-inch TV
m
• “This is a drop in the ocean, we ought to be touching
A
r
millions" Tata BP Solar CEO K. Subramanya
a r
e k
g n
a n
it R
A m
TCS (1968)
• India's oldest & Asia's largest software firm
• $4.3 bn, 1 lakh+ employees
• Major home player, unlike most others
•
a r
2004- 10% equity, IPO raised $1.3 billion
•
k
Poised to tap outsourcing boom & growing geographies
e
n
• Gen-next IT products- Transportation, retail, finance,
•
g
M&A to extend geographic reach- TKS 360 cr Technosoft
n
a
• Software for Fiat, Ferrari F1, Iveco, CNH
it R
A m
Titan (1984)
• JV- TIDCO, introduced India to quartz
r
• Rare Indian company to acquire collaborator, Ebauches
•
•
JV- Timex, discontinued 1998
ka
e
2008- Sales 3041cr, Profit 150cr, 60% MS, 12000 outlets
n
• Global No. 6, India’s largest, 9mn watches, 30 countries
•
g
Began ‘watches as gifts’, Psychographic segmentation
n
a
• Titan, Edge, Raga, Heritage, Wall Street, Regalia,
Classique, Royale, Aviator, Nebula, Octane, Fastrack
•
• t R
Market Xylys, Tommy Hilfiger & Hugo Boss
i
Sonata, India's largest selling watch brand
•
m
Tanishq (1994)- India's largest jewellery brand Rs 2000 cr
A
r
• Jewellery (66%), Watches (31%), Others (3%) sunglasses,
Rx eye wear, precision components
a r
e k
g n
a n
it R
A m
Voltas (1954)
a r
e k
g n
a n •2400 cr
R
•AC & Engg-services
it •Turnaround
•Tapping AC boom in malls,
A m offices, residences
Dr •Middle East major- Bahrain

City Centre, Royal Palaces &
Burj Dubai Tower- world's
tallest building
Trent (1998)
• 632 cr, Retail foray
• 3 formats
a r
•
e k
Westside- 29 lifestyle dept stores,17 cities
•
g n
Star Bazaar- Hypermarket (3)
•
a n
Landmark- Books & Music (10)
•
t R
Target- Indian middle-class
i
•
• m
Indian franchisee-Sisley’s (3)
A
Dr
Run by Noel Tata
a r
e k
g n
a n
it R
A m
Infiniti Retail (2006)
• 100% subsidiary of Tata Sons
•
a r
Croma- consumer durables & electronics
e k
n
• 21 large stores (15-20,000 sq ft each)
•
ng
6000 products, 8 categories, 200 brands
•
Ra
World class in-store experience
• it
Woolworths (Australia)- technical support
A m
& strategic sourcing
a r
e k
g n
a n
it R
A m
Tata Communications (2002)
•7200 cr
•Global thro’ M&A
•VSNL (2002)
a r •Tyco (‘04) 585 cr
k
•TeleGlobe (2005)
ne 1075 cr
•Global voice and
ng data services leader
Ra •India's top ISP &

intl wholesale voice
it carrier
A m •2008- India WiMax

rollout, worlds
largest
Other Tata Firms
Firm Estd Sales Sector Business
Cr
Autocomponent Sys 1995 2600 Engineering Autocomponents
r
Tata International 1962 2300 Materials Leather Exports
Tata Asset Mgt 2000
a
2100
k
Finance Financial planning
e
Telco Construction Equip 1998 1617 Engineering JV Hitachi- Earthmovers
Tata Technologies 1994
g n 961 IT Auto /Aerospace Design

Tata Projects
Rallis
1979
a
1948 n 938
702
Engineering
Chemicals
Engineering , Construction
Agrochemicals
Tata Elxsi
it R
1989 308 IT Product design
m
Tata Business Support 2004 145 IT BPO
Tata Interactive
Tata Sky
r A 1990
2001
93 IT
Comm
Custom e-learning
DTH Satellite TV
Tata AIG
Advinus
D 2000
2005
Finance
Chemicals
Insurance Premium 2100cr
Drug discovery
Strategy Mix
Year Strategy Motive
90s Divest businesses Beauty, Pharma, Oil, Soaps- Focus
1998 NPD Indica Passenger car entry, indigenous
2003 M&A Daewoo trucks (SK)
a r
Chinese market & small truck segment entry
2003 Strategic stake
e k
Indonesian coal mine, SE Asian steel mills
n
00s M&A- Hotels in US Consolidate, enter premium segment
2004 M&A Tyco Intl- $130 mn
ngTata, one of the world's biggest carrier of
a
(Undersea telecom cables) international phone calls
(UK), $91 million

it R
2004 M&A Incat International Tata Tech- major outsourced industrial design
supplier for US auto & aerospace
m
2007 M&A Corus $13 bn, UK Scale, range, access to global automakers
r A
2007 Divest Glaceau to Coke Tata Tea made $523mn profit in 9 months
D
2008 M&A Ford's JLR brands Global auto map, distribution setup, SUV
2008 NPD Nano ULC car, redefined
amitrangnekar@gmail.com global auto dynamics
Diversification Synergies
Power
a r Hotels
Consumer
e k IT
g n
a n
Synergy
R
Retail Telecom
it
Steel
A m
r
Voltas
D Automobile Finance
Firm Holding
Shareholding in
Group firms Tata Steel 27%
• 2002- Fortify promoter Tata Motors 34%

holdings in group firms to
ward off predators
a r Tata Coffee 51%
• Huge funds involved, but
critical
e k Tata Chem 29%
g n
• Creeping acquisitions (5-10%
n
pa) Tata Power 32%
• Tata Steel a
• Crossholdings in group firms
R Tata Tea 29%

• 4%(1970s)
it
• 18%(2000)
• 27%(2002)
A m Tata Elxsi 38%
Dr Trent
Voltas
27%
26%
BSE 31 Mar 2006
Growth strategies in a globalizing economy
“ We have 2 guiding arrows. One points overseas,

where we want to expand markets for our existing
r
products. The other points to India, where we want
a
e k
to explore the emerging large mass market- not by
following but by breaking new ground in product
g n
development and seeing how we can do something
n
that hasn’t been done before.”
a
R
“ We expand into geographies where we can have a
it
meaningful group presence, and where we could make
an impact and participate, in that country’s
A m
development, as in India. When you visit a country or
r
examine a company, you intuitively know if there’s an
D
opportunity, and then you flesh out that opportunity in
one form or other.” amitrangnekar@gmail.com
Domestic Expansion
• N5Y outlined $28 billion capital investments
• Steel
a r
• Auto
e k
• Telecom
g n
n
• Power
• Chemicals
Ra
t
• Technology
mi
r A
The RNT era
• Rocky first decade as chairman
• Commissioned sweeping review to plot strategy
• Eased out group veterans
a r
•
k
Focus- emerging businesses, technology, geographies
e
n
• Unorthodox group structure
•
g
Agile, individual companies to respond to new
n
opportunities and threats
a
• "We rescaled our thinking in terms of growth. We just
R
t
forced and cajoled our businesses to make this happen”
mi
r A
Key issues
• Successor, with values & CSR
r
• Tata family members own just 3% shares in Tata Sons
•
a
Building coherent vision, retaining diverse focus
k
e
• Cases- Daewoo (South Korea), Charoen Pokphand
n
(Thailand) & Salim Group (Indonesia)
g
• Compete in developed and developing markets
n
a
• In tough times- growth, retain talent, value system &
ethics
t R
• CSR initiatives- tempting targets for cuts
i
A m
Group Numbers 2005-07 (‘000 Cr)
a r
e k
g n
a n
it R
A m
Market Cap (‘000268Cr)
239
221
a r Cap
k
M -
BSE
129
ne 5 % o f
ng
Ra
it
2005
A m
2006 2007 2008
Sectoral Contribution %
Sales PAT Exports HR Key Firm
% %
a r % %
Services 7 18
e k 6 10 Taj Hotels
Materials 21
g
34
n 9 18 Tata Steel
Engineering 31
a n
21 14 14 Tata Motors
Energy 6
it R 6 2 2 Tata Power
m
Consumer 5 5 1 16 Titan
Chemicals
r A5 5 1 2 Tata Chemicals
Info & Comm
D 25 11 67
38 TCS
Top 12 Firms (2006-07)
Firm Estd Sales Cr % Contr Sector
Tata Motors 1945 30000 26 Engineering
Tata Steel 1907
a
23000
r 20 Materials
TCS 1968
k
17000
e
15 IT
n
Tata Communications 2002 7200 6 Communications
Tata Teleservices 1995
ng 6000 5 Communications
a
Tata Power 1911 6000 5 Energy
Tata Chemicals
Titan
it R
1939
1984
5200
2800
4.5
2.5
Chemicals
Consumer
Autocomponent Systems
A m1995 2600 2 Engineering
r
Taj Hotels 1903 2600 2 Services
D
Voltas 1954 2400 2 Engineering
Tata International 1962 2300 2 International
92
Company M-Cap (%) Apr 08
a r
e k
g n
a n
it R
A m
Dr
M-Cap of Top 5= 87%amitrangnekar@gmail.com
How Do they Innovate
• Global innovation- think, aspire & experiment
•
r
Tetley- beverage-dispensing machine without electricity
a
•
k
Tata Chemicals- bio-fuels & ethanol from biowaste
e
n
• TCS - academia (Stanford & MIT) interaction
•
g
Ginger Hotels- Profitable from year1
n
a
• Innometer- thermometer to gauge degree of innovation at
R
every Tata company
it
• R&D teams across the Tata universe share learnings
A m
• “We don’t believe that what we are doing is innovative. It is
just a part of the day’s work”
a r
e k
g n
a n
it R
A m
References
• http://images.businessweek.com/ss/08/03/0312_tata/index_01.ht
•
r
http://www.rediff.com/money/2007/dec/28sld1.htm
a
•
• k
http://images.businessweek.com/ss/07/08/0802_tata/index_01.ht
e
n
Ratan Tata: India's shining jewel
g
Pete Engardio, BusinessWeek
n
• Business World Jan, 2008
a
R
• Business Today Jan, 2008
it
• Mckinsey Quarterly- Interview 2005
A m
• “Tatas understand the Indian consumer
a r
and have a passion for growing India. The
e k
Tata Group has always been
g n
professionally run and has paid attention
a n
to building very high intellectual capital
it R
and has the financial strength to mount
big, audacious and innovative projects” V
A
Govindrajan m

Tata Group - Diversification

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a r

• 1998- Tata Indica

ka Tata Industries (1945)

• JV- James Finlay, UK

Dr •Middle East major- Bahrain

a r •Tyco (‘04) 585 cr

ng data services leader

Ra •India's top ISP &

A m •2008- India WiMax

g n 961 IT Auto /Aerospace Design

ngTata, one of the world's biggest carrier of

(UK), $91 million

• 2002- Fortify promoter Tata Motors 34%

R Tata Tea 29%

“ We have 2 guiding arrows. One points overseas,

A m1995 2600 2 Engineering

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