Tata Sons Hiring Bankers to Help Sell or Merge Dozens of Units

Nearly six months after his turbulent elevation to run India’s biggest conglomerate, Natarajan Chandrasekaran is assembling a team of dealmakers to refocus some of the group’s biggest businesses, expand its financial services and consumer businesses and sell or merge dozens of smaller units, according to interviews with senior executives. As many as one-third of the group’s 100-plus units could go as Chandrasekaran and his team try to balance the need to prune unprofitable businesses at the 149-year-old group with the Tata family legacy of social responsibility, according to officials who asked not to be named because the negotiations are private. Chandra, as the 54-year-old chairman is called by his colleagues, has set his primary task to bring more focus to a conglomerate that assembles buses in Africa, serves kebabs at London’s ritzy Bombay Brasserie and sells cheap bags of salt in Indian supermarkets among much else. There are plans to merge consumer and retail businesses, bring infrastructure firms under one umbrella, club defense units together and combine technology firms, according to the people.

tata sons

“Chandrasekaran is hoping to increase the efficiency of the conglomerate and exit from businesses which don’t fit the group’s priorities or don’t have the ability to scale,” said Harish H. V., partner at consultancy firm Grant Thornton India LLP. “He is trying to simplify the complex conglomerate business structures, many of which were created in another era due to licensing and other regulatory reasons or the need to form joint ventures.” A Tata Group spokesman said the company does not comment on such matters.

The six largest listed Tata companies account for about 90 percent of the group’s market capitalization and total revenue, according to data compiled by Bloomberg. To help broker the reorganization, Tata Sons Ltd. in May hired former investment banker Saurabh Agrawal as chief financial officer, filling a role that had been vacant for five years. Agrawal was a key lieutenant of Kumar Mangalam Birla and helped the billionaire merge Grasim Industries Ltd. with Aditya Birla Nuvo Ltd. into a $9 billion industrial group, and Idea Cellular Ltd. with Vodafone Group’s local unit to create India’s largest wireless carrier. Shuva Mandal was picked to be the group’s legal counsel the same month, taking over from old Tata hand Bharat Vasani.

Chandra also hired Ankur Verma, who was Bank of America Corp.’s head of India for deals in technology, media, telecommunications, oil and gas, and Nipun Aggarwal who specializes in metals and mining deals. More hirings from banks are expected, the executives said. Chandra’s priority of restructuring Tata “is evident from the fact that the first set of core team members have come from investment banking and legal background,” Harish said. The marathon-running chairman’s focus is on repairing the group’s balance sheet, in line with his fitness-before-performance mantra. He has asked top executives across companies to focus on profit and cash reserves, not EBITDA, a measure that doesn’t include interest payments on loans and other costs, one of the people said. Total debt for 25 of Tata’s listed companies had swelled to 2.42 trillion rupees ($38 billion) as of March 2017, compared to 1.75 trillion rupees when Cyrus Mistry took over as chairman from Ratan Tata in December 2012. That doesn’t include about 350 billion rupees of debt at unlisted and unprofitable Tata Teleservices Ltd., which is high on Chandra’s list of urgent fixes.

Chandra may have to tread carefully in the way he reorganizes the group to avoid the fate of his predecessor. The board of Tata Sons ended Mistry’s four-year tenure and appointed Ratan Tata as interim chairman in October, citing a “trust deficit” and “repeated departures” from the group’s culture and ethos. Mistry, in turn, had accused Tata Sons and its largest shareholder Tata Trusts, of “oppressing” the interests of investors and had said Ratan Tata, through his chairmanship of Tata Trusts, had sought to control business decisions. Chandra, speaking to Tata Steel Ltd. shareholders on Aug. 8, said there have been challenges “owing to leadership change” at Tata Sons. The input from Ratan Tata and other owners in managing the company had been “value enhancing,” he said. Ratan Tata’s intervention to settle an acrimonious $1.2 billion lawsuit with NTT Docomo Inc. has paved the way for Chandra to sell or merge the troubled telecom unit. Tata Teleservices Ltd. has been battered by a tariff war unleashed by the entry of Mukesh Ambani’s Reliance Jio Infocomm Ltd.

All consumer-facing and retail businesses could be brought under one umbrella, according to the executives Bloomberg News spoke to. Under consumer products and retailing, Tata Group sells products ranging from bottled water to jewelry and footwear through a bevy of companies such as Tata Global Beverages Ltd., Tata Coffee Ltd., Titan Company Ltd., Trent Ltd. and Tata Unistore Ltd. Similar plans are being worked out for the defense units, the people said. Tata Advanced Systems Ltd., Tata Advanced Materials Ltd. and some of Tata Power Company Ltd. and Tata Motors Ltd. are part of group’s defense portfolio. Infrastructure firms may also be clubbed together while technology arms may be folded into Tata Consultancy Services Ltd., the company that Chandra helmed for more than seven years, making it Asia’s largest software services provider and Tata’s cash cow. Financial Services, currently a smaller piece in the group and mostly under closely held Tata Capital Ltd., is set to get more attention under the new chairman. “The management bandwidth, the financial resources, everything which is finite can be channeled in a proper way,” said Vishal Kulkarni, a Singapore-based analyst at S&P Global Ratings. “Rather than putting up resources in businesses that are not growing or not returning sufficient returns, it maybe better to pool it in companies which are the long-term focus.”

  • Bloomberg

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