Tata Sons earmarks Rs 10,161 crore investment in 5 group units, including retail, insurance
Tata Sons, the investment holding company of the $100-billion Tata Group, has approved a Rs 10,161-crore investment plan that focuses on the conglomerate's finance, insurance, defence, realty and retail units - all areas that its chairman is aggressively betting on.
Recent buzz had suggested that the Tata Group was ready to start focussing on new businesses like smart cities but latest developments suggest that the conglomerate's chairman N. Chandrasekaran is still concentrating on getting the house in order first.
According to The Economic Times, Tata Sons, the investment holding company of the $100-billion Tata Group, has approved a Rs 10,161-crore investment plan that focuses on the conglomerate's finance, insurance, defence, realty and retail units - all areas that its chairman is aggressively betting on.
The Tata Group has been in serious consolidation mode - focussing on growth, scale, synergies and making itself leaner - in the past year under Chandrasekaran, who took over the reins after Cyrus Mistry's ouster. Two key challenges that he faces are turning around loss-making units and ensuring the right capital allocation for growing businesses. So he is reportedly looking to trim unscalable businesses to concentrate more on sectors and companies expected to clock a high growth rate.
In line with this game plan, the daily added that Tata Sons has decided to invest up to Rs 1,800 crore in Tata Advance Systems; Rs 1,750 crore in Tata Realty & Infrastructure; Rs 2,500 crore in Tata Capital; Rs 260 crore in Tata AIG General Insurance; Rs 250 crore in Infiniti Retail; and Rs 2,001crore in subsidiary holding company Panatone Finvest. The investment budget also includes Rs 1,600 crore earmarked for a possible acquisition of IDBI Federal Life Insurance. The company reportedly took the decisions in its board meetings on March 26 and May 18.
The Group might leverage its cash cow Tata Consultancy Services (TCS) for this. After all, the IT firm announced a Rs 16000 crore share buyback plan just last month. Given that Tata Sons has a 73 per cent stake in TCS and, if it tenders shares, could stand to gain around Rs 10,000 crore from the buyback and the cash may be used to steer core sectors forward. It had raked in a similar amount when it tendered over 3.61 crore shares in TCS' similar-sized buyback programme last year. The funds were reportedly used to unwind the complicated crossholdings among Tata companies.
Chandrasekaran took over reins when the Group was going through turbulent times - the European steel business was bleeding, the Indian telecom arm was accumulating losses, the automobile business was losing market share and the brand image had taken a hit from the public spat with Mistry.
His first-year report card has been pretty impressive so far, and he has addressed many of the legacy issues of the Tata Group companies. His tenure has also seen three major deals - merging Tata's mobile services business with Bharti Airtel in no-debt and no-cash deal, merging Tata Steel's European business with German company ThyssenKrupp's business in the region, and Tata Steel's acquisition of Bhushan Steel, unless NCLAT throws a spanner in the works.
Chandrasekaran has also divided the Group's companies into various clusters, like one for finance and a separate one for aerospace, defence and infrastructure. Large companies Tata Steel, Tata Motors and TCS have their own independent clusters.
Citing experts the daily added that going by Tata Sons' recent moves, Chandrasekaran is focussing on aggressively growing the diversified conglomerate even as he continues to streamline the group. That apart, he is concentrating more on the domestic market rather than the uncertain and slow global markets, which currently yield about 60 per cent of the conglomerate's revenues.