Tata group dominates BT500 with 16 powerhouses, from TCS to Titan and beyond

Tata Power is definitely a large company, but it is just one of multiple businesses that the eponymous salt-to-software conglomerate owns. Other prominent ones include Tata Consultancy Services, Titan Company, Tata Steel, Tata Motors, and Indian Hotels, apart from businesses in the retail, chemicals, consumer brands, electronics sectors, and much more.

If there is a common thread that runs through this diversified conglomerate, it is the relentless focus on keeping pace with the changing needs of the dynamic world we live in. For instance, themes like green steel, electric vehicles, and artificial intelligence will dominate the growth story in the foreseeable time to come. Investors too like that new theme and the new way of doing business. The group is consciously ensuring that its companies are also in tune with these changes. A key development for the conglomerate after the demise of Ratan Tata has been the elevation of Trent’s boss Noel Tata as Chairman of Tata Trusts, who has also moved into the board of Tata Sons, the group’s holding company.

This year’s BT500 list of India’s Most Valuable Companies on the basis of market capitalisation has 16 firms from the Tata group. Apart from the biggies like TCS, Tata Steel, Tata Motors, Tata Power, Titan Company, and Indian Hotels, some of the other names are Tata Chemicals, Trent (a company that grew under Noel Tata and is an outperformer on the bourses), Tata Consumer Products, Tata Chemicals, Tata Elxsi, a key player in design and tech services, and Voltas.

Historically, companies in the group have seen high investor interest. That was also visible last November, when Tata Technologies’ initial public offering (IPO) was launched, the first from the group in almost two decades. It received 69 times more bids than the shares on offer. A potential listing of Air India that the Tatas bought back for Rs 18,000 crore from the government could well see even more enthusiasm again.

Treadmill of change

From its listing in 2004, TCS has delivered on financial performance and shareholder returns. At an average market capitalisation of over Rs 14 lakh crore between October 2023 and September 2024, it is the second most valuable company on the BT500 list of India’s Most Valuable Companies after Reliance Industries.

“If you look at our history, the mantra has always been growth with profitability. Our secret sauce is tight operational control leading to industry-leading margins,” says Samir Seksaria, Chief Financial Officer, TCS. In a world where disruption is the norm, the company’s approach is about “being ahead of the curve” by offering new service lines to get better pricing in the medium to long term. That is coupled with making investments early.

Citing the case of TCS’ deal to upgrade BSNL’s infrastructure, Seksaria outlines how TCS has stayed ahead by “deploying cutting-edge indigenous solutions”.

It is a period of constant change at TCS, in line with a dynamic business scenario, as it is with any of the Tata group companies. At the turn of the century, it bought over Tetley, the first overseas acquisition, followed by others, and reaching a peak with Tata Steel’s $12-billion deal to buy Corus. Soon after, Tata Motors picked up the iconic Jaguar Land Rover (JLR) from Ford.

The group saw strategic advantages in going global, but every business of the Tata group is tuned into the Indian perspective, says Deven R. Choksey, Chairman and MD of investment advisory firm DRChoksey Finserv. The group is looking to attract global skills, technology, and financial resources. “With a quality asset and a good culture, it makes for a unique combination,” says Choksey.

TCS is a prime example of that approach. For a company that took advantage of labour arbitrage in the past, Seksaria now highlights innovation as its hedge against technology-led disruption cycles. “Our emphasis on investing to develop cutting-edge capabilities and industrialise this and training our talent at scale to work in these areas have been instrumental in achieving growth and profitability.”

Large but nimble

One standout feature of the Tata group companies is their ability to adapt to the times. P.B. Balaji, Group CFO of Tata Motors, says the decision to have distinct strategies for the company’s verticals was a result of that approach. “It has been about winning decisively in commercial vehicles, winning sustainably in passenger vehicles, and winning distinctively in JLR,” Balaji explains.

In the case of passenger vehicles, the turnaround came with the pivot to meet the evolving demand for sports utility vehicles (SUVs). “Today’s portfolio was built from new products to enhance the addressable market, make smart product interventions, and refresh designs and features in a timely manner,” points out Balaji.

The distinct strategy is perhaps most visible when it comes to electric vehicles. Here, the company has put in place the ecosystem, including charging stations, to increase its adoption. It has also laid emphasis on manufacturing key components locally and developing supporting infrastructure.

Turning it around

In the case of Tata Power, one experience altered the way it functioned. “Based on our experience in turning around the power distribution company (discom) in Delhi, we acquired all four discoms in Odisha in 2021. In just three years of operation, they have gone from ailing to profitable enterprises,” says Sinha. Now, through the company’s solar rooftop offerings and electric mobility chargers, it wants to promote sustainable energy choices.

Meanwhile, Tata Steel, which went through its own share of challenges in foreign markets, has doubled down on India. Koushik Chatterjee, ED & CFO of Tata Steel, says there’s no downplaying the external challenges facing the industry today “are unprecedented”.

Chatterjee highlights issues like the tapering of construction demand in China, which has led to a surge in exports, and the conflicts in eastern Europe and the Middle East disrupting supply chains and pushing up prices. The current fiscal year is one of significant change for the company. “It is a transition year for Tata Steel UK as it exits its legacy loss-making blast furnace operations accompanied by a 30% reduction in our workforce.” Hence the thrust on India, one of the fastest-growing markets for steel.

“Recently, we commissioned one of the world’s largest blast furnaces in Kalinganagar and consciously rebalanced our portfolio through two acquisitions in long-products,” says Chatterjee.

Tata Steel also went the inorganic route to acquire Bhushan Steel and then Neelachal Ispat. The latter was acquired through the government’s disinvestment process.

Being the first-mover on green steel, the company could alter the story dramatically, especially in Europe. “By 2030, 60% of what we produce there will be low CO2 emissions and ready to face regulatory and market changes,” says Chatterjee.

Vipul Prasad, Founder and CEO of Magadh Capital Advisors, is bullish on Tata Steel because of its focus on sustainability, cost leadership, and top-notch capital allocation, apart from the plans to tweak its geographical mix. “They have also continued to plug gaps in the product mix as well as the production process with enhanced technology and digital application,” he explains.

Clearly, technology will be a key enabler, and TCS’ Seksaria says AI, cybersecurity, and sustainability are all technological evolutions “that are rewriting the future of industries”. From his company’s point of view, he says, “We are at the crossroads of not just another technology cycle but a critical juncture in the whole of human evolution. The upsides are humongous, as are the ethical risks involved.”

For a group that was started in 1868, and that makes everything from salt to software, the future beckons!

@krishnagopalan