From Finance to Capital

Six years after the Tatas' non-banking finance company, Tata Finance, succeeded in sullying the image of the hitherto spotless business group by getting mixed up in a scandalous accounting fraud, Bombay House is readying for a second wind in the financial services sector. Last fortnight, Tata Sons, the holding company of the Tata Group, announced the formation of a wholly-owned subsidiary company, Tata Capital.

At the time of writing, two Tata warhorses were in the race to head the new firm: Kishor Chaukar, Managing Director, Tata Industries, who is a former MD of ICICI Securities and was also on the board of ICICI Ltd (when it was a development financial institution); the other honcho in the fray is the 50-year-old Praveen Kadle, Executive Director & CFO, Tata Motors.

More interesting than who will head Tata Capital, however, is the prospect of the subsidiary clashing swords with AIG, the Tatas' joint venture partner in the insurance space (life and general). AIG is looking to expand in India beyond insurance, into areas which the Tatas are already in (asset management, for instance) as well as areas like consumer finance, into which Tata Capital will take the plunge. According to a Tata Sons release, the new subsidiary has lined up activities like capital market, merchant banking, housing finance, private equity investments, assets and vehicle financing, retail finance and other related areas. "These activities will be undertaken either in subsidiary companies or divisions of Tata Capital depending on regulatory requirements," says the Tata release.

Observers point out that while the Tatas are a bit of a late entrant in consumer financing and merchant banking, the clout of the Tata brand name coupled with ample cross-selling opportunities (across sectors like energy, telecom and retail) augur well for the new company.