The objective is to “substantially reduce” the number of listed and unlisted entities, so that it’s a cohesive business operation, people in the know said. The idea is not to reduce the workforce, they said. Chandra told executives last month that their plan was not to inflict any pain through consolidation. However, in a recent interview to Fortune, Chandra had said that some of the Tata firms may have to be shut during the consolidation.
Responding to a Business Standard questionnaire on various aspects of consolidation, a Tata Sons spokesperson said, “We do not comment on such matters.” Sources aware of the plans said the consolidation would unfold over the next one year or so. The effort would be to bring down the number of group companies’ subsidiaries, running into dozens in many cases. “In the process, there will have to be shutdown. None of it is going to be easy,” another source said.
Besides defence, infrastructure and finance, retail or consumer business is another area of consolidation. Broadcasting business Tata Sky, where the numbers have remained weak, is one of the ventures where the group could look at an exit. Telecom is another. Under retail, companies
may be reconfigured. The retail portfolio includes Trent, Landmark, Tata International, CLiQ and Croma, among others.
Another person aware of the plans said this should not be seen as a typical consolidation and that the group would not shrink. Rather, this is an exercise to make the business much more powerful by putting the group’s muscle behind it all, he said. The source cited the example of Tatas reviewing its banking foray and giving up the licence. “A company is created at a particular time for a particular reason. When the purpose of a company is lost, there has to be a review.”
In some other cases, like in defence, the sector is being scaled up and no two companies
should compete with each other in the same space, the person said. “Operate as if it’s one fleet.”
The recent case of shifting the Tata Consultancy Services (TCS) unit out from Lucknow, impacting 1,000-odd employees, is being seen as a test. The employees were given the option of moving to other facilities such as Noida and Indore, but the staff still sought political intervention. TCS had said: “We are consolidating our UP operations. There have neither been any job losses nor have we asked anyone to quit.” Through consolidation, the group, with an employee count of over 650,000, is looking at managing the time and energy of its people better. “Why go for hundreds of registrar of company filings, preparation of so many annual reports,” an industry watcher said.
Tata Sons has been one of the biggest investors in the private sector in the last decade. It has made fresh equity investments worth nearly Rs 45,000 crore in its various listed and unlisted firms. At the end of March 2016, it had direct equity investments in 15 listed and 32 unlisted group companies, with cumulative investments of Rs 54,139 crore. However, only a handful make money.
Among the listed firms, TCS accounts for 90 per cent of Tata Sons’ dividend income, while firms such as Tata Steel, Indian Hotels, Tata Motors’ domestic business, Tata Power and Tata Chemicals remain cash guzzlers. Only half of the 20 key listed firms reported double-digit return on net worth in FY17. Three listed firms were loss-making on consolidated basis and two had large accumulated losses resulting in negative reserves. In its unlisted portfolio, most of the key companies
such as Tata Tele Services, Infiniti Retail are loss making, despite being in operations for over a decade.