Chandra’s 'Neu' Tata: Decoding the Group's Pivot

The recent launch of the Tata group’s super app Tata Neu—which brings the $103-billion-plus conglomerate’s several services under one digital umbrella—is, in a sense, much more than just a new initiative. To those watching the storied group closely, it is another important example of the transformation which the group is undergoing over the past few years, something which is now gathering serious momentum. Importantly, the markets are now recognising many of these changes. 

The 58-year-old group chairman Natarajan Chandrasekaran—popularly known as Chandra—the first non-Parsi to ever head the 154-year-old salt-to-steel conglomerate, is driving it into newer vistas with an agility which, despite the trust and the stability usually associated with the House of Tata, it wasn’t known for until now. Whether it is the string of new-age acquisitions it undertook—from e-pharma company 1MG to BigBasket to Curefit—or the landmark acquisition of ailing national airline Air India, the Tata group is now being seen in a new light by the market and also by veteran Tata watchers. 

Before proceeding further, let’s look at some figures. Between February 21, 2017, when Chandra took charge as the chairman of Tata Sons, the holding company of the group, and April 18, 2022, the Tata group’s total market capitalisation has risen from ₹8.27 lakh crore to over ₹22.76 lakh crore, a massive 175 per cent increase. 

But there’s more to this than just the figures. As tax expert and ace dealmaker Dinesh Kanabar tells me, the group isn’t seen any longer as a one-legged horse dependent overly on crown jewel software giant Tata Consultancy Services (TCS) which Chandra himself headed for years before taking charge of the group after its bitter battle with former chairman Cyrus Mistry. Today Tata Steel, Tata Motors, Tata Consumer Products (TCPL, a transformation story in itself), Tata Elxi, Titan, Voltas and others are also contributing handsomely to the group’s fortunes. Once again, figures tell the story well. TCS’s market cap has risen 166 per cent during the period I have considered here, significant considering the massive market cap of ₹13 lakh crore it commands now. But take a look at the other companies, and the point becomes clear: Tata Elxi (944 per cent growth in market cap), TCPL (747 per cent), Titan (445 per cent) and Trent (424 per cent) are all chipping in despite their different sizes and footprints. The commodities cycle would surely have aided the group in cases like Tata Steel, but the broad point is that the overall direction is positive and a new energy is palpable. And that, at this point, seems to be yielding results. 

The 3S strategy of the group which Chandra elucidated in his 2019 message to group employees—simplify, synergise and scale—seems to be gathering steam as the group moves forward. In his message for 2022, Chandra indicated that the group’s strategy going forward would be based on four key themes: digital, new energy, supply chain resilience, and health. “Our companies are already adapting to these changes, and we are witnessing a stronger performance. Our new pilots and businesses, from 5G to TataNeu and Tata Electronics, are poised to benefit from these four themes going forward,” he had said.

What the new leadership at Tata has achieved under Chandra is to have a more cohesive equation between Tata Sons and the operating companies, leading to better strategic movement forward. Besides, Tata watchers tell me that the enormous amount of data which the group has at its disposal will help it as it seeks greater synergies, and one manifestation of that is the new super app. In the Air India case, while there has been a lot of talk about the challenges of managing the airline post acquisition, it was a relatively inexpensive buyout given the circumstances, and the challenges would have been budgeted when the group put in its bid.

Market expert Jyotivardhan Jaipuria of Valentis Advisors tells me that the group is now more focussed on its core areas, and does not hesitate to let go of what it perceives as problem areas or non-core. The decision to let go of the once-critical Nano project, he tells me, is a good example of this. There’s greater focus on return on equity, going in for asset-light models like those in the hotels business, and a greater willingness to divest or consolidate businesses for greater focus. In all this, they seem to be meeting with a fair degree of success. In fact, this combination of a favourable commodities cycle along with structural changes seems to have worked for the group.

So far, then, it’s been good going. But as most conglomerates move from relatively old-world businesses—Reliance and Adani, for instance are great examples of old-economy-led groups demonstrating massive agility and speed to enter new business areas relevant today (think Jio and Jio Platforms or Adani Green Energy) -- Tata will come up against serious competition in several areas. Chandra’s four themes for 2022, then, couldn’t have come a day too soon. If Tata is to continue the momentum it is witnessing across businesses, it will need to build on this success quickly with the new-found agility it has shown of late. Neu is a good example of a new Tata. But it’s a bitterly competitive and unpredictable new world. And shareholders are watching keenly.

The author is Editor, Business Today.