Tata Sons plans to halve number of listed companies in India

When N Chandrasekharan took over as the Chairman of Tata Sons in early 2017, he had two on his agenda. It included boosting the market valuation of the Tata group companies and restructuring the group businesses along comparable lines. With Chandra getting a second term till 2027, this is going to be the top priority. In fact, Tata Sons has decided to halve the number of listed companies in its portfolio from 29 to 15 in the coming months. The idea would be to create large companies with scale that can compete globally and also to ensure better synergies among similar businesses.

Some consolidation is already done

It is not all future plans. The Tata group has already put in place some important steps to consolidate the group companies. Here is some progress that has already been made.

    a) In March this year, the Tata group had announced the merger of Tata Coffee into Tata Consumer Products. The company was formerly called Tata Global Beverages but the name was changed to Tata Consumer Products to give a more FMCG flavour to the company business. Earlier, the salt business of Tata Chemicals had also been absorbed into Tata Consumer Products to reflect business classifications better.

    b) Last week, Tata Steel Ltd approved the merger of 7 companies into itself of which 4 are listed companies. For instance, the listed companies to be merged into Tata Steel include Tata Metalics, Tata Steel Long Products (formerly Tata Sponge Iron), Tinplate Company Ltd and TRF Ltd. Post the merger, these 4 companies would ceased to be listed on the stock exchanges. 

    c) In 2018, the Tata group had consciously consolidated the defence business owned by the various group companies under a single head, Tata Aerospace and Defence, so as to have the heft to bid for large defence orders farmed out by the Indian government.

While the above are already done and approved, there are a lot more of business line restructuring that is yet to be done. After all, the ultimate aim is to reduce the 29 listed companies to 15. In addition, the 60 plus unlisted companies and its scores of subsidiaries would all be realigned under such classifications for simplifying the business and ensuring greater synergies.

Future course of consolidation at Tata group

While a lot has already been done in terms of consolidation, much is still pending. Here are some of the areas that Tata Sons will focus on in the coming months.

    a) In the technology space, Tata group already has the giant TCS, the highly valuable Tata Elxsi and the unlisted Tata Digital. The group would be looking to consolidated the various technology and digital interests of Tata group under one header.

    b) In automobiles, Tata group has 3 listed companies viz. Tata Motors, Automotive Stampings & Assemblies Ltd and Automobile Corp. of Goa Ltd. In addition, there is the unlisted Tata Autocomp Systems which is also likely to be consolidated under the auto franchise of the Tata group.

    c) On the retail front, Tata group has a number of very strong retail franchises including Titan, Trent, unlisted Infiniti Retail (Croma) as well as the consumer electronics division of Voltas. Three out of the above four are listed entities and the group will look to leverage Tata Neu also in this space to boost ecommerce sales.

    d) Finally, the more recent airline business may also be consolidated by merging Air Asia, Vistara and Air India under a single aviation brand. That would give them the scale to compete with Indigo and create a strong aviation franchise in India.

For too long, just a handful of companies like TCS, Titan and to a lesser extent Tata Motors and Tata Steel have been driving most of the stock market value. It is time to consolidate and rethink the value proposition of the group.