How values have driven growth and successful diversification for the Tata group for over 100 years...
r a k h t e w o r G e n v i r d s g e u l a V n p u o r a G a t a T R t i m A r a k e n r g n a R D mit m A r D
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Tata Group 2008 (1868) • • • • • • • • •
Always aligned biz with nation building & values India’s biggest private group, most respected, 3% GDP Sales- $50 bn (incl Corus & JLR), $29 bn excl Tata Steel + Tata Motors + TCS= 75% of sales 98 companies, 3 Lakh employees Total market cap $66b ($12bn in 2003) India’s highest 27 listed firms, 3mn Shareholders Operations- 80+ countries, exports- 85 countries. 5 core values: integrity, understanding, excellence, unity and responsibility- enshrined since inception
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7 sectors: engineering, materials, services, information systems,
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Engineering
Energy & communications
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Services
Information systems
Tata’s
Consumer products
Materials
Chemicals
Tatas • • • • • • • •
Founder- Jamshetjee Tata- 1868, Trading 1903- Taj, Mumbai- Luxury Hotels 1907- Tata Steel- Asia’s 1st steel plant 1910- Tata power- Hydro Power 1932- Tata Airlines- Civil Aviation 1968- TCS- Software 1998- Tata Indica 2008- Tata Nano- World’s cheapest car
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At Tata’s, we have retained the fire of idealism and in its glow we have come to recognise that no wealth or power can be more valuable than our dignity; no loss of profit can be more critical than the loss of our credibility; no skills or qualifications can substitute the integrity of our
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Other firsts Industrial • 1912- 8 hour work day • 1915- Free Medical Aid • 1917- Free Schooling • 1920- Paid Leave, PF
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Educational • Foreign scholarships • IIS, Bangalore • TISS, TIFR, NCPA • Tata Memorial Hosp
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Bombay House
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• Group HQ 1926 • Trusts & holding Co.s • 9 Board Members • Provide strategic vision • Control Tata brand • Big Deals • Mentor managers • Perspective • Promote values & CSR
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Tata Sons Board RK Krishna Kumar Director
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on o an S N airm Ch Vice
Ala Ex n Ro e In c Di sling
t er
na recto tio na r l
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JJ Irani Director TQM
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R Gopalakrishnan
Exec Director Brand, HR
Ishaat Hussain Fin Director Finance, Legal
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Aru Ex n Ga ec n dh D M & i r ec i A, t Ta or x
ar k au Inds h C ta ess KA Ta sin u MD w b Ne
Sir Dorabji Tata Trust + Sir Ratan Tata Trust + Other Tata Trusts 66% shareholding
Tata Sons (1868)
29% shareholding
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Tata Industries (1945)
Promoter of all Tata companies
(Major Holdings)
•TCS •Tata Steel •Tata Motors •Tat Power •VSNL •Tata Chemicals •Tata Tea •Indian Hotels •Tata Infotech
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•Titan •Voltas •Tata Advanced Materia •Tata Elxsi •Idea Cellular •Trent •Tata Teleservices •Rallis •Tata Investment•Information Tech Park •Tata Autocomp System •Tata Teleservices •Tata International
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JRD
RNT
led Tatas from 1938 to 1991 (200cr to 10600cr) 53 years
leads Tatas since 1992 till date (10600+ cr to (200,000 cr)
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Ratan Tata • • • • • • • • • • • •
Born December 28, 1937 School- Campion, Mumbai US- Age 15, for further studies Degree- Arch & Structural Engg- Cornell AMP- Harvard Business School. Joined Tata Group, 1962 Director in Charge- Nelco 1971-94 Chairman Tata Steel- 1977… Chairman Tata Motors, Industries- 1981… Chairman Tata Sons, Tea- 1991… Chairman VSNL- 2002-2005 Chairman 1991- As India liberalised
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RNT Restructuring 1992 Exit
Enter
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Marginal biz Cosmetics Paints Oil Soaps Pharma Cement
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Build
Potential biz
Core biz
Retail Telecom Biotech Technology
Steel Motors Chemicals Power
Pare group companies to 12 Transform group revenues, retain values Ease
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Tata Motors (1945) • • • • •
India’s largest auto company- 32500 cr, 1 trucks, 2 cars World- 5th M&H CV maker, 2nd M&H Bus maker 1999- Indica (UK, SA, Spain & Italy) M&A- Daewoo's truck business, 465 cr, 2004 “We acquired Daewoo as we saw an opportunity in an entity that had a certain market share, that had a product line that we did not have, and that was a strategic fit for us. We brought in our marketing reach and made the company more profitable.” RNT
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2005- Ace mini-truck < Rs 3L, hit, 250,000 units Fiat JV- India, South America- cars & trucks Plants- Pune, Jamshedpur, Lucknow, Pantnagar, Singur 2,000 touch points
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Ace Magic
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Ace Ad
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The success of Tata Ace, a 4-wheeler, in a market dominated by 3-wheeler load carriers, was due to a deep understanding of the market needs and customer requirements.
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Nano2008
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•World's ULCC •Set to revolutionise Indian car market •Global implications •Huge export potential
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Innovation • • • •
1998- Tata Safari, India’s 1st SUV 1999- Indica, India’s 1st fully indigenous car 2005- Ace, sub-1Ton CV, new segment “Innovation is primarily implementing a new idea to give the company a competitive edge, in all aspects of the value chain“ Kant • “I can’t think of any other product or service which has built up such a strong brand without spending money. Within 24 hours of the launch, the Nano website had four million hits. Now that’s a hit.” Kant. •
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Jaguar-Land Rover M&A • • • • • •
Marquee brands acquired from Ford Apr08- $2.3 billion Access to premium markets SUV global entry Distribution set-up for Tata Motors Unique- Worlds cheapest (Nano), most rugged (Land Rover) & costliest (Jaguar)
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Tata Chemicals (1939) • Rs 5,800 cr • Tata Salt- India's largest salt brand • 2005- M&A Brunner Mond UK, 526 cr • 2008- M&A General Chemicals US, 4020 cr • Global No.2 soda ash producer • Fertilisers
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Indian Hotels (1903) Taj PalacesLuxury Taj ResortsLeisure Taj ResidencyBusiness
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GingerBudget
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1903- Taj Mahal Hotel, Mumbai 1974- 1st Intl beach resort- Aguada, Goa 2008- Rs 2600 Cr, India's largest10500 rooms, 88 hotels, India 72, 12 nations 16% share of organised hotel sector M&A 2005- The Pierre (New York) 202 Cr 2005- The Ritz Carlton (Boston) 2007- Campton Palace, San Francisco 235 Cr Taj Air- luxury private jets & luxury yachts Expansion Rs 2100 crores over N3-4Y 147 hotels, 20000 rooms
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Tata Teleservices (1995) • • • • •
6000 cr M&A Hughes Telecom in 2001 Largest retail chain, 5,000 outlets India's 2nd largest CDMA mobile-phone & Early CDMA entrant, but distant second (25 mn subscribers) to Reliance (45 mn) • Excellent response in L2Y • Tata Indicom- broadband & wireless service provider • Alliance- Virgin Mobile, target India's fast-growing youth market
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Tata Power (1911) • • • • • • •
6000 cr India's largest private-sector power generator 2,300 mw installed base Secret of Mumbai’s superb power situation Expansion- invest $4 bn, double capacity 4500 mw Building power plants in Arabia, Africa & Asia 30% stake in PT Koltim, Indonesia – to acquire coal deposits
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Tata Steel (1907) • “In the early '90s, Tata Steel was saddled with antiquated plants, bloated payroll & no market orientation. . . we were a good study in demise" Muthuraman
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• Mid-90s, slashed workforce from 78,000 to 38,000 • Early retiring workers- full pay till 60, lifelong health care • Jamshedpur- Spend $40mn/year supply all civic services & schools but employ only 20,000 of 700,000 residents • Spent $2.5 billion on modernization • M&A NatSteel Singapore (2004) 1282 cr • M&A Millennium Thailand (2005) 1818 cr
• 2008- 23000 cr, nimble player, Key group dynamo • One of the world's lowest cost producers of steel • Triple capacity to 15 million metric tons by 2010
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Corus Acquisition 2007 • • • • •
Use own RM
M&A- Corus (UK-Dutch) steelmaker $12bn Global No.5 Asia, Middle East, Europe & Africa Focus on high-value specialized steels- automobiles $7.4 billion debt? Lay offs? High-cost ops? Margins? Strategy
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Make low cost raw steel
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Ship to Corus
Finish goods at Corus plants
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Earn higher Margins
Tata Tea (1950) • • • • • • • • • • •
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JV- James Finlay, UK 1980s- From commodity player to branded tea producer Operate 54 tea estates in India Industry- rising inputs, shrinking margins, MNC M&A- Tetley UK (2000) 1831 cr Rationale- Tata plantations + Tetley’s global reach M&A- Good Earth Tea (US) 144cr, JEMCA(Czech) 100cr, Eight O' Clock coffee (US) 990 cr M&A- Himalayan Mineral water- Premium, at source Glaceau- M&A, sold in 9 months to Coke- $400 mn profit Now- Build Tata Tea brand, NPL, exit tea plantation biz Overtook HUL in beverage volumes in 2007 in India
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Tata BP Solar • • • • • •
$260 million JV- BP (UK) Renewable energy- Solar power, home & street lighting Exporting solar cells, modules, and power systems Germany- Rooftop solar-electric systems for buildings EMs- Bring affordable power to villages not in power grid Low-cost, solar-powered water pumps, refrigerators, & Rs 1200 lanterns that burn for 2 hours on charging • Fitted 50,000 homes with Rs 12000 systems that can power 2 lights, a hot plate, a fan, and 14-inch TV • “This is a drop in the ocean, we ought to be touching millions" Tata BP Solar CEO K. Subramanya
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TCS (1968) • • • • • • • •
India's oldest & Asia's largest software firm $4.3 bn, 1 lakh+ employees Major home player, unlike most others 2004- 10% equity, IPO raised $1.3 billion Poised to tap outsourcing boom & growing geographies Gen-next IT products- Transportation, retail, finance, M&A to extend geographic reach- TKS 360 cr Technosoft Software for Fiat, Ferrari F1, Iveco, CNH
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Titan (1984) • • • • • • • • • • •
JV- TIDCO, introduced India to quartz Rare Indian company to acquire collaborator, Ebauches JV- Timex, discontinued 1998 2008- Sales 3041cr, Profit 150cr, 60% MS, 12000 outlets Global No. 6, India’s largest, 9mn watches, 30 countries Began ‘watches as gifts’, Psychographic segmentation Titan, Edge, Raga, Heritage, Wall Street, Regalia, Classique, Royale, Aviator, Nebula, Octane, Fastrack Market Xylys, Tommy Hilfiger & Hugo Boss Sonata, India's largest selling watch brand Tanishq (1994)- India's largest jewellery brand Rs 2000 cr Jewellery (66%), Watches (31%), Others (3%) sunglasses, Rx eye wear, precision components
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Voltas (1954)
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•2400 cr •AC & Engg-services •Turnaround •Tapping AC boom in malls, offices, residences •Middle East major- Bahrain City Centre, Royal Palaces & Burj Dubai Tower- world's
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Trent (1998) • • • • • • • •
632 cr, Retail foray 3 formats Westside- 29 lifestyle dept stores,17 cities Star Bazaar- Hypermarket (3) Landmark- Books & Music (10) Target- Indian middle-class Indian franchisee-Sisley’s (3) Run by Noel Tata
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Infiniti Retail (2006) • • • • • •
100% subsidiary of Tata Sons Croma- consumer durables & electronics 21 large stores (15-20,000 sq ft each) 6000 products, 8 categories, 200 brands World class in-store experience Woolworths (Australia)- technical support & strategic sourcing
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Tata Communications (2002)
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•7200 cr •Global thro’ M&A •VSNL (2002) •Tyco (‘04) 585 cr •TeleGlobe (2005) 1075 cr •Global voice and data services leader •India's top ISP & intl wholesale voice carrier •2008- India WiMax rollout, worlds largest
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Other Tata Firms Firm
Estd
Sales Sector Cr
Business
Autocomponent Sys
1995
2600
Autocomponents
Tata International
Engineering
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2300
Materials
Leather Exports
2000
2100
Finance
Financial planning
Telco Construction Equip
1998
1617
Engineering
JV Hitachi- Earthmovers
Tata Technologies
1994
961
IT
Auto /Aerospace Design
1979
938
Engineering
Engineering , Construction
1948
702
Chemicals
Agrochemicals
1989
308
IT
Product design
2004
145
IT
BPO
1990
93
IT
Custom e-learning
Comm
DTH Satellite TV
Finance
Insurance Premium 2100cr
Tata Asset Mgt
Tata Projects Rallis Tata Elxsi Tata Business Support Tata Interactive Tata Sky Tata AIG Advinus
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2001
2000
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2005
Chemicals
Drug discovery
Strategy Mix Year Strategy
Motive
90s
Beauty, Pharma, Oil, Soaps- Focus
Divest businesses
1998 NPD Indica
Passenger car entry, indigenous
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2003 M&A Daewoo trucks (SK)
Chinese market & small truck segment entry
2003 Strategic stake
Indonesian coal mine, SE Asian steel mills
00s
Consolidate, enter premium segment
M&A- Hotels in US
2004 M&A Tyco Intl- $130 mn Tata, one of the world's biggest carrier of (Undersea telecom cables) international phone calls 2004 M&A Incat International (UK), $91 million
Tata Tech- major outsourced industrial design supplier for US auto & aerospace
2007 M&A Corus $13 bn, UK
Scale, range, access to global automakers
2007 Divest Glaceau to Coke
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Tata Tea made $523mn profit in 9 months
2008 M&A Ford's JLR brands
Global auto map, distribution setup, SUV
2008 NPD Nano
ULC car, redefined
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global auto dynamics
Diversification Synergies
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Hotels
Consumer
IT
Synergy
Retail
Steel
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Telecom
Voltas
Automobile
Finance
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Firm
Shareholding in Group firms • 2002- Fortify promoter holdings in group firms to ward off predators • Huge funds involved, but critical • Creeping acquisitions (5-10% pa) • Crossholdings in group firms • Tata Steel • 4%(1970s) • 18%(2000) • 27%(2002)
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Holding
Tata Steel
27%
Tata Motors
34%
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51%
Tata Chem
29%
Tata Power
32%
Tata Tea
29%
Tata Elxsi
38%
Trent
27%
Voltas
26%
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BSE 31 Mar 2006
Growth strategies in a globalizing economy “ We have 2 guiding arrows. One points overseas, where we want to expand markets for our existing products. The other points to India, where we want to explore the emerging large mass market- not by following but by breaking new ground in product development and seeing how we can do something that hasn’t been done before.”
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“ We expand into geographies where we can have a meaningful group presence, and where we could make an impact and participate, in that country’s development, as in India. When you visit a country or examine a company, you intuitively know if there’s an opportunity, and then you flesh out that opportunity in one form or other.”
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Domestic Expansion • • • • • • •
N5Y outlined $28 billion capital investments Steel Auto Telecom Power Chemicals Technology
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The RNT era • • • • • •
Rocky first decade as chairman Commissioned sweeping review to plot strategy Eased out group veterans Focus- emerging businesses, technology, geographies Unorthodox group structure Agile, individual companies to respond to new opportunities and threats • "We rescaled our thinking in terms of growth. We just forced and cajoled our businesses to make this happen”
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Key issues • • • •
Successor, with values & CSR Tata family members own just 3% shares in Tata Sons Building coherent vision, retaining diverse focus Cases- Daewoo (South Korea), Charoen Pokphand (Thailand) & Salim Group (Indonesia) • Compete in developed and developing markets • In tough times- growth, retain talent, value system & ethics • CSR initiatives- tempting targets for cuts
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Group Numbers 2005-07 (‘000 Cr)
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Market Cap (‘000268Cr) 221
129
2005
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2006
2007
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f o %
2008
BSE
ap C M
Sectoral Contribution % Sales Services Materials Engineering Energy Consumer
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Chemicals
Info & Comm
PAT
Exports
HR
Key Firm
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%
%
%
7
18
6
10
Taj Hotels
21
34
9
18
Tata Steel
31
21
14
14
Tata Motors
6
6
2
2
Tata Power
5
5
1
16
Titan
5
5
1
2
Tata Chemicals
25
11
67
38
TCS
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Top 12 Firms (2006-07) Firm
Estd
Sales Cr
Tata Motors
1945
30000
26
Engineering
1907
23000
20
Materials
1968
17000
15
IT
Tata Communications
2002
7200
6
Communications
Tata Teleservices
1995
6000
5
Communications
1911
6000
5
Energy
1939
5200
4.5
Chemicals
1984
2800
2.5
Consumer
1995
2600
2
Engineering
1903
2600
2
Services
1954
2400
2
Engineering
1962
2300
2
International
Tata Steel TCS
Tata Power Tata Chemicals Titan
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Autocomponent Systems Taj Hotels Voltas
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Tata International
% Contr Sector
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92
Company M-Cap (%) Apr 08
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M-Cap of Top 5= 87%
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How Do they Innovate • • • • • •
Global innovation- think, aspire & experiment Tetley- beverage-dispensing machine without electricity Tata Chemicals- bio-fuels & ethanol from biowaste TCS - academia (Stanford & MIT) interaction Ginger Hotels- Profitable from year1 Innometer- thermometer to gauge degree of innovation at every Tata company • R&D teams across the Tata universe share learnings • “We don’t believe that what we are doing is innovative. It is just a part of the day’s work”
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References • • • •
http://images.businessweek.com/ss/08/03/0312_tata/index_01.ht http://www.rediff.com/money/2007/dec/28sld1.htm http://images.businessweek.com/ss/07/08/0802_tata/index_01.ht Ratan Tata: India's shining jewel Pete Engardio, BusinessWeek • Business World Jan, 2008 • Business Today Jan, 2008 • Mckinsey Quarterly- Interview 2005
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• “Tatas understand the Indian consumer and have a passion for growing India. The Tata Group has always been professionally run and has paid attention to building very high intellectual capital and has the financial strength to mount big, audacious and innovative projects” V Govindrajan
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