Six Tata Firms To Gain The Most From Team Chandrasekaran’s Revamp 

Six of more than 100 Tata Group companies stand to gain the most as parent Tata Sons Ltd.’s Chairman N Chandrasekaran and his team focus on improving performance at the $103-billion salt-to-software group, Credit Suisse said.

These are Tata Motors Ltd., Tata Steel Ltd., Voltas Ltd., Titan Company Ltd., Tata Chemicals Ltd., and Tata Global Beverages Ltd.

The new team’s strategy will be to improve return ratios, focus on domestic consumption and leveraging brands better, simpler holding structure, digital initiatives, and relevance in all the sectors the group is present in. Execution, however, is what will differentiate the team, said Credit Suisse.

The 149-year-old group is India's largest conglomerate with 25 listed companies and more than 6.5 lakh employees. It operates businesses in most key industries, including technology, automotive, telecom, infrastructure, power, defence, and retail. However, only three group companies – TCS, Tata Motors and Tata Steel – contribute more than three-quarters of the group revenue and all its profit.

Tata Motors

Tata Motors’ Indian business contributes just 13 percent of Credit Suisse’s Rs 630 target price. The largest commercial vehicle maker needs to improve this business, the brokerage said.

Slower product refresh, and a relatively weaker brand perception and dealer network have been the key reasons for Tata Motors’ weaker positioning in this segment.

The management is taking efforts to optimize the workforce and improve cost efficiences in the production process, it said.

Tata Steel

Tata Steel’s domestic business was helped by a higher volume growth, better pricing and resulting improvement in profitability, while restructuring was on in its international operations.

Over the last five years, Tata Steel’s investment in international business has come down as the company is focusing more on its domestic business. There should be higher investments in the local operations, given a large market, faster growth, and a scope to leverage the Tata brand, the brokerage said.

Voltas

Voltas is a market leader in air-conditioners. The recent foray in other consumer durable segments broadens its portfolio and demerging the electro-mechanical projects division can make Voltas largely a consumer business, said Credit Suisse.

Making it a pure consumer player will help improve return ratios and strengthen channel presence as the company will have multiple products to help it target a higher share of the consumer's wallet, the brokerage said.

Titan Company

Titan has a return on equity of more than 15 percent and the company is set to benefit from the group's focus on domestic consumption, said Credit Suisse. The growth in its jewellery business over the next two years will likely accelerate, driven by wedding demand, high-value diamonds, collections and network addition.

Titan is also trying to build new business segments and may consider joint ventures with international brands. Within jewellery, there could be opportunities to acquire regional players to drive market share.

Titan can also tap the apparel segment which is a large market and introduce imitation jewellery, said Credit Suisse.

Tata Chemicals

Tata Chemicals is trying to undo some of its historical mistakes like buying high-cost assets overseas and has been investing in higher-return consumer businesses, said Credit Suisse. The company is looking at consumer products and can leverage the Tata brand for its new offerings.

It will invest in products like pulses where the company can leverage its large salt distribution reach and convert another product from the unorganised to the organised sector. The company can expand into other related businesses, targeting a sales split of 50 percent from branded and non-commodity businesses, the brokerage said.

Tata Global Beverages

The company can sell cross-holdings in the group entities, said Credit Suisse. The management is focusing on health and wellness-related products, ready-to-drink tea and e-commerce. It has started re-investing in the Tata Tea brand and launched several new products.

Some restructuring is on at its Eastern Europe business and the Middle East operations are in the incubation stage.