The first significant decision that Natarajan Chandrasekaran made as Chairman of the Tata Group was one that was rather symbolic of the changes that were to come. After assuming control of the company on May 30, 2017, he waited three months before requesting that the famous headquarters of the 152-year-old conglomerate, Bombay House, be renovated by architects. Since it was constructed in 1924, the heritage building on Homi Mody Street in the Fort region of Mumbai had undergone no changes. The building was based on the design of Scottish architect George Wittet, who was also responsible for designing the Gateway of India. The ceiling was cracked, there was inadequate natural light, and the structure was susceptible to attack by termites. Chandrasekaran, who began his professional life at TCS and made significant contributions to the company’s expansion over the course of three decades, desired to infuse his concept of “One Tata” and make Bombay House a lively and exciting place to work.

Up until that point, the businesses that were part of the group had been operating independently within the building, each using their own board rooms, conference halls, and pantries. There were restrictions placed on the mobility of top executives within their respective businesses. Chandrasekaran brought about structural changes to the workplace and established shared conference rooms. Additionally, he was successful in getting a Starbucks location opened on the ground level. The objective was to break down any mental walls that stood in the way of experiencing unity.

The changes could not have arrived at a more opportune time. When he assumed charge of the group, they were in critical need of leadership and guidance. The removal of Cyrus Mistry as chairman of the company and the fights that ensued in the executive dominated the headlines. In addition, significant group businesses like Tata Steel, Tata Motors, Tata Power, and Tata Teleservices were saddled with an unmanageable amount of debt. Chandrasekaran ensured that the group’s attention was directed toward resolving outstanding issues and improving performance, and he was successful in doing so. The chairman’s office was redesigned on the concept of “metamorphosis,” which is now being implemented to transform the 100-company group into a technology-enabled conglomerate that is ready for the future. During his four years at the helm, the company has concentrated on three key areas: the discovery of new business possibilities, the modernization of established companies, and the resolution of long-standing issues.

At this point, preparations are being made to expand on those. Chandrasekaran is placing a renewed emphasis on the importance of customer centricity and the financial fitness of highly leveraged manufacturing businesses in light of the large opportunities that are expected to emerge in e-commerce, electronics, electric mobility, medical and diagnostics, renewable energy, and payments. For example, Tata Steel, which has a net debt of Rs 86,170 crore, needs to work its way out of difficulties in Europe and return its attention to the Indian market. Tata Power, which has a debt of Rs 36,363 crore, needs to concentrate on businesses related to renewable energy and consumer goods, and Tata Motors, which has a debt of Rs 54,700 crore in the automobile industry, needs to get ready for electric mobility.

“Each and every sector of the economy is transitioning into an ecosystem enterprise. It’s not like you can make a product and then attempt to sell it after you’ve made it. In every situation, Chandrasekaran says in an exclusive conversation with BT, “you have to interact with the customer and the consumer.” According to him, the team is focusing on simplification, synergy, and scale in their work. (3Ss). Artificial intelligence, data analytics, and cloud processing will all be driving forces behind each company. They are required to have no outstanding debt and to adhere to sustainable business practices.

“Tata Group is able to reach a significant number of customers thanks to the many brands it carries. However, as a collective, we have a responsibility to provide them with goods and services that not only satisfy their demand and requirement, but also do so in a manner that makes their lives easier, as he has stated. According to what he has discovered, the organization is working toward the development of a technologically connected business that integrates a variety of products and services in order to fulfill the requirements of the clientele.

Compassionate Management

When Chandrasekaran was younger, he walked three kilometers to school from his home in Mohanur, which is located in the Namakkal district of Tamil Nadu. His father was a barrister, and Chandrasekaran’s family belonged to the middle class. After completing his education, he had the intention of following in his father’s footsteps and becoming an agriculturalist. But everything altered when I earned a Master of Computer Applications from the National Institute of Technology in Tiruchirappalli.

According to those who have observed him, compassion is something that comes effortlessly to him because of his humble beginnings. According to a person who works with him at TCS, if he acts aggressively in the morning, he will return in the evening to make things right. During the past four years, when the group has been refocusing their efforts and consolidating their rehabilitation, this has proven to be very helpful. During these years, the group focused on determining its primary competencies, which included products, services, and geographic areas, as well as pooling resources and bolstering its balance sheets. The group is on the verge of undergoing a transformation, despite the fact that some old issues concerning group businesses are still open for discussion. Chandrasekaran has been described as both a scholar and a man of action by Harsh Goenka, the Chairman of RPG Enterprises. “At a time when technological advancement is the primary factor influencing the outcome of games, his experience working for TCS is assisting him in driving transformation in group companies.”

Digital And Electronics Play

Chandrasekaran is intent on bolstering the significance of the past while simultaneously planting the foundation for the future. According to Janmejaya Sinha, Chairman of the Boston Consulting organization in India, he has rekindled the spirit of entrepreneurship that existed within the organization. (BCG). In the beginning, he had six primary goals in mind, which were to focus on the Indian consumer, data and digitisation, the increasing formalisation of the economy, sustainability, selective infrastructure, and opportunities for nation building. All of these goals fit in well with the Tata brand. The idea resulted in the establishment of a new business known as Tata Digital, which focuses primarily on e-commerce by means of a platform known as a Super App.

In order to establish Tata Digital, Chandrasekaran assembled a group of highly skilled programmers hailing from TCS as well as other businesses. Pratik Pal, a former employee of TCS, was designated CEO of Tata Digital in August 2019 by Tata Sons. Pal served as the worldwide head of the industry unit that was responsible for retail, travel, transportation, hospitality, and consumer packaged products. Aarthi Subramanian, Group Chief Digital Officer for Tata Sons and another expert from TCS is providing assistance to the business in the development of the e-commerce Super App. This app will offer all of the products and services that the group has to offer. “Each of our companies caters to millions of customers, which contributes to the group’s substantial consumer base. We are working to bring them together and provide them with all of the goods and services they require. not only merchandise made by Tata but also other brands. It has open infrastructure, as does the Super App. This will be a compelling value proposition because we will have a robust loyalty program, payments engine, financial products, and a number of other categories,” he adds.

It is not an easy task to develop an e-commerce application that can contend with the likes of Amazon, JioMart, and Flipkart, which is owned by Walmart. Billionaire Mukesh Ambani is considering developing a “Super App” in China comparable to WeChat and Alipay. He is working on this concept. The purpose of a super app is to provide a centralized access point to a broad variety of products and services. Online communications (like WhatsApp), social media (like Facebook), online marketplaces (like eBay), and other services are all rolled into one with WeChat and Alipay. (like Uber). The retail presence of the group, which includes Trent, Infinity Retail, Tata Consumer Products, Titan, and Voltas, as well as the retail presence of the group’s financial products businesses, such as Tata Capital, Tata Asset Management, Tata AIA, and Tata AIG, will be complemented by the app. The company is also discussing the possibility of purchasing a controlling interest in the online grocery store Big Basket and the online pharmacy business 1mg for a total of $1.2 billion.

Atma Nirbhar

The production of electronic goods constitutes the second aspect of the digital activity. According to sources, the newly established company Tata Electronics intends to manufacture high-end technology products in Chennai and is currently in discussions with Apple Inc. regarding the possibility of manufacturing iPhones. When it comes to this market, the Tatas are up against fierce competition from Taiwan’s Foxconn and Wistron, which are both iPhone manufacturers in India. Croma, Voltas, Titan, and Nelco, which are all involved in consumer technology or shopping, will benefit from the addition of electronics manufacturing. Chandrasekaran states, “We have a vision to scale up this business to a large enterprise,” and he says this.

Tatas, in its pursuit of new business opportunities, recently introduced Tata Payments at a time when PayTM, Flipkart’s PhonePe, and Google Pay are all competing for a significant portion of the market share in the payments industry. In 2019, PayTM’s most recent round of financing resulted in the company being valued at $16 billion. PhonePe asserts that it is worth 5.5 billion dollars. Due to the fact that they are late to the game, the Tatas will have a difficult time making headway in the field of digital transfers. On the other hand, this service may have a role to perform in the Super App’s backend.

After that, when the Covid pandemic was at its height, the organization began to stock up on medical supplies. Tata Medical and Diagnostics (Tata MD) was established by the company with the goals of providing solutions that are patient-centric and making healthcare affordable and reliable. The first product is the world’s first CRISPR Cas-9-based Covid-19 test that is accessible for purchase in commercial settings. Ventilators are another product that the business plans to produce. “Are you suggesting that we start a business on a large scale?”According to Chandrasekaran, this entire stack of medical apparatus has a significant amount of demand as well as potential in India. The company’s capabilities in electronics and manufacturing have been extended to include the new industry. However, that is not enough to compete with manufacturers from around the world. Analysts believe that in order for the Tatas to expand this industry, patented technologies are required.

Taking Charge

The development of the Super App and the technological orientation of the group’s businesses, as well as the entry into the healthcare and medical equipment industries, are all efforts that are being made with the intention of capitalizing on new business possibilities in India. That is a significant improvement compared to what he inherited, which included legal battles with Cyrus Mistry, conflicts in the boardroom, and the underperformance of businesses. The first thing that he needed to do was to settle down the media, the boards, and the judiciary. “His effort was to get company CEOs to focus on running their companies rather than reading news about the dispute,” an insider at Tata explained.

The next step was to address concerns regarding the profitability of large businesses. Among the 30–40 major companies, only a select few, like TCS and Titan, were registering continuous growth in profits. Those companies were the exception, not the rule. TCS continued to be the primary contributor to revenue for the holding business Tata Sons, accounting for approximately 90 percent of total revenue. Some of the companies’ priorities were completely off. For example, Tata Chemicals was manufacturing cutting-edge chemicals and marketing salt at the same time. Every corporation had a number of other businesses under its umbrella.

As a result, the very first action he did with regard to the company was to organize the fundamentals. There was a critical void in the absence of responsibility. Deleveraging, increasing free cash flow, reducing cross-holdings, and simplifying company portfolios were also necessary to receive a significant amount of attention. In order to pivot the group, he added the 3As to the 3S slogan. These 3As stand for responsibility, agility, and aspiration.

At times, Chandrasekaran questioned the presence of the company in industries that were not important. Nearly ten CEOs have been recruited by him, including Sunil D’Souza at Tata Consumer Products, Puneet Chhatwal at Indian Hotels, and Rajiv Sabharwal at Tata Capital. Most recently, he chose Marc Llistosella, a former executive at Daimler, to lead Tata Motors beginning in July. The incumbent President and Chief Executive Officer of TCS Japan, Amur Lakshminarayanan, has been selected to lead the floundering digital infrastructure division, Tata Communications. A departure from the previous method of doing things was to introduce new ideas into the group.

Clustering, as well as Cleaning Up

Around 30 of the group’s businesses were reorganized by Chandrasekaran into 10 distinct clusters. This was done primarily with the intention of optimizing synergy among the group businesses, which had been operating independently up until this point. (See The 10 Clusters). Tata Power, Tata Realty, Tata Housing, Tata Projects, and Tata Consulting Engineers are all part of the infrastructure network, for example.

In addition to clustering, he combined enterprises that were comparable. Tata Chemicals’ consumer division was merged with that of Tata Global Beverages (TGBL), and the resulting company was rebranded as Tata Consumer Products. (TCPL). In 2017, the total value of TGBL’s market capitalization was Rs 9,000 billion. The current value of TCPL is 45,000 billion rupees.

Tata Steel was restructured so that it now consists of four separate businesses: long products, downstream, mining and utilities and infrastructure, and long products and downstream. The lucrative Indian market will once again be the primary emphasis. Around the same time ten years ago, Europe accounted for approximately two-thirds of total manufacturing. At this time, two-thirds of it comes from India. In the first nine months of the fiscal year 2020/21, domestic companies produced 12.18 MT of steel, while European companies produced 6.9 MT. Because of the captive iron ore mines, the domestic industry generates enormous amounts of wealth.

In a similar manner, Tata Motors made the decision to either consolidate its smaller businesses or leave them altogether, and as a result, the company is now primarily focused on three areas: passenger cars in India, commercial vehicles, and Jaguar Land Rover. The manufacturing of the Nano, the dream project of Ratan Tata, was terminated because the vehicle was unable to find buyers despite being upgraded. A year ago, the board of directors of Tata Motors gave their approval to a proposal to float the passenger vehicle business, which would include electric vehicles (EVs), as a subsidiary in order to attract strategic investments. In the 2019/20 annual report, the Managing Director and Chief Executive Officer of Tata Motors, Guenter Butschek, stated that “The subsidiarisation of the passenger vehicle business enables the realisation of its full potential with mutually beneficial strategic alliances and better access to products, architectures, powertrains, new-age technologies and capital.”

In a further step toward modernization, Tata Power intends to transfer its renewable power assets along with the debt that corresponds with those assets to an infrastructure investment company. (InvIT). This action will cut the company’s total debt in half, which is a significant reduction. It has already reduced the debt by Rs 7,552 crore in 2020, and it plans to reduce it even further to Rs 25,000 crore altogether by establishing an InvIT and selling a stake in it. It has entered the final chapter of negotiations with private equity funds. It has also made the decision to merge with the money-losing Costal Gujarat Power, which operates the 4,000 MW imported coal-fired Mundra power plant, for the purpose of streamlining its operations and providing additional financial assistance.

The long-standing dispute regarding the arbitration award given to DoCoMo for its share of Tata Teleservices was finally resolved, and as a result, the company was able to refocus its efforts on the telecom infrastructure business conducted under the banner of Tata Communications. It made a payment of 8,400 billion rupees to the Japanese business, which put an end to the ongoing dispute. In addition, Tata Sons paid off its historical obligations in the telecom industry totaling Rs. 38,000 crore. These obligations included loans from banks and payments owed to the government. After that, it got clear of the money-losing Tata Teleservices business by selling it to Bharti Airtel, which is in the mobile telephony industry.

The cloud, mobility, the Internet of Things, collaboration, security, and network services are the primary areas of emphasis for Tata Communications at this time. It is responsible for transporting approximately 30 percent of all internet traffic channels worldwide. In addition, the government has declared its intention to sell off its 26.12% shareholding in Tata Communications. In addition, one of the most important things that needed to be done was to reduce the number of businesses in which the promoters held a minority share. The majority of the time, Tata Sons purchased cross-holdings. It increased its share in Tata Motors and Indian Hotels by almost 10 percentage points, and it increased its stake in Tata Communications by 5 percentage points.

According to Janmejaya of BCG, “Chandra does not shy away from difficult issues and possesses the courage to take them on.”

Businesses Of Scale

According to Chandrasekaran, he had a good understanding of the power of the Tata brand and the company’s history when he began working there in 2017. According to the chairman of Tata, “Whenever you have a group that has such a large presence and a strong history of more than 150 years, you should expect that there will also be complexity.” Keeping this in mind, he put the strategy of simplifying and maximizing cooperation into action. After the cleaning and the clubbing that was done in the first phase, he moved on to the third point, which was attaining scale.

Tata Steel increased its capacity in India to more than 20 MT by constructing a 3 MT plant in Kalinganagar, acquiring Bhushan Steel, which had a capacity of 5.6 MT, and taking over the steel business of Usha Martin. (1MT). In the next ten years, Chandrasekaran anticipates a substantial increase in the amount of steel that is consumed in India. “As a result, we took a risk and acquired Bhushan Steel and Usha Martin,” said the CEO. “With the way the market has turned and the demand continuing to rise, those are proving to be accurate,” he adds. However, the reality is that it is contending in a market that requires a significant amount of capital with companies like JSW Steel and ArcelorMittal Nippon (the former Essar Steel). Recently, the Managing Director and Chief Executive Officer of Tata Steel, T.V. Narendran, stated that the company’s domestic business has the highest profitability in the world and has generated a 20% EBITDA margin even when the company was experiencing the worst of times.

Despite starting from a relatively low position, the passenger car industry of Tata Motors has more than doubled its market share. We are pleased to announce the beginning of the Tata EV ecosystem. We are seeing huge desire for EVs. In addition, there will be additional commentary forthcoming regarding our entry into the EV transformation. JLR is also undergoing a significant transformation at this time. According to Chandrasekaran, all of these factors can be seen in the company’s operating achievement. To facilitate the development of the electric vehicle (EV) ecosystem, Tata Motors is tapping the knowledge and experience of a number of other Tata businesses, including Tata Power, Tata Chemicals, and Croma. As a result of increased demand for Tiago, Tigor, Altroz, and Nexon, the company’s market share in the passenger car industry increased from 4.8 percent in 2019/20 to 9.5 percent in the October-December period of 2020. However, the market share decline has not yet been stopped in the industrial vehicle sector; during the period of October-December 2020, it stood at 29.6%, compared to 45.19% during the same period in 2018/19.

Chandrasekaran is credited with having demonstrated tremendous ability to understand the levers for sustainable development, according to Uday Kotak, Managing Director and CEO of Kotak Mahindra Bank. “In each and every group company, he has maintained an unrelenting concentration on value creation, return on capital, execution, and accountability.”

Tata Power has made the decision to shift its emphasis from coal-fired power plants to renewable and consumer businesses. As a result of this decision, the company plans to increase its production from the current 11 gigawatts to 25 gigawatts within the next five years. (including thermal, hydel and renewable). All additional capacity will be added to the renewable energy sector. In addition to that, it places an emphasis on renewable energy for consumers by means of rooftop solar, micro grids, and transportation. However, as a result of investments made by the Adani Group, the JSW, and the Shapoorji Pallonji Group, the renewable energy sector has become extremely competitive. Total, a significant French energy company, has reached an agreement to purchase a twenty percent stake in Adani Green Energy, which has ambitious plans to construct a renewable energy portfolio with a capacity of twenty-five gigawatts.

TCPL, which just recently came into existence, is also aiming for scalability. According to Sunil DSouza, the Managing Director and Chief Executive Officer of TCPL, the business intends to broaden both its market presence and its product offerings in order to become a sizeable FMCG competitor. TCPL is a food and beverage business that has a presence in a variety of food and beverage categories, including tea, coffee, salt, and certain food categories. “To begin, one of our primary goals is to broaden the inventory by exploring both organic and inorganic avenues. “On the organic route, we will ramp up our innovation flywheel, and on inorganic opportunities, we will make sure that they pass muster both on our strategic and financial filters,” adds D’Souza. “On the inorganic opportunities, we will make sure that they pass muster both on our strategic and financial filters.” His second objective is to improve performance while also doubling his direct reach within the next year and his overall reach within the next three years. In the fast-moving consumer goods (FMCG) industry, this is a Herculean challenge. According to what he has said, “We have already expanded our reach to 2.4 million outlets, up from 2 million outlets in March 2020.”

But despite the fact that they have been working tirelessly on it for the past four years, not everything at Bombay House is in order.

Both Sorted and Not Sorted

Tata Steel Europe remains a source of ongoing tension within the company. In 2019, it made an attempt to merge the steel industry, which was operating at a loss, with the German steel giant Thyssenkrupp. However, this was called off after complaints were raised by the European Commission on the grounds that the merger would reduce the amount of competition in the market and increase prices. A few days ago, Tata Steel’s attempt to transfer its profitable division in the Netherlands to the Swedish steelmaker SSAB was also unsuccessful. The division in question was the 7.5 MT plant. Additionally, Tata Steel attempted to sell the units in Thailand and Singapore, but without any results.

The attempt by the steelmaker to become a worldwide giant was unsuccessful, and as of March 2020, it had racked up a net debt of more than one million crore rupees. As a result, the Indian division was left with significant obligations to settle debt. However, during the first nine months of the 2020/21 fiscal year, it was able to reduce its net debt by 18,609 crore and has plans to reduce its total debt by 12,000 crore during the months of January through March.

Tata Motors also intends to eliminate its net automotive debt by the year 2025, which currently stands at Rs 54,700 crore. The full recovery of the passenger automobile and commercial vehicle markets will be required to accomplish this goal. Over the course of the past couple of quarters, the debt owed by the automobile industry has decreased by 7,000 crore rupees.

Tata Power’s Mundra power facility is another one of the company’s money-losing operations. Since March 2013, when the project was first commissioned, it has been plagued with bad luck. Due to the fact that the permitted tariff for the electricity produced by the plant is Rs 2.26 per unit, the plant has not been successful in generating working capital for operation purposes. The business is in the process of renegotiating the prices of their products with the five states that are responsible for the procurement of their power: Gujarat, Haryana, Punjab, Maharashtra, and Rajasthan. However, this procedure takes a significant amount of time and must be approved by the Central Electricity Regulatory Commission.

The continuing occurrence of losses in the aviation industry is another source of anxiety. In the 2018/19 fiscal year, AirAsia and Vistara each recorded losses of Rs. 670 crore and Rs. 830 crore, respectively. In addition to that, the company has shown interest in purchasing the financially struggling Air India airline by submitting an expression of interest. According to Chandrasekaran, it takes a few years to establish a successful airline business. “The recovery time for the aviation industry has lengthened as a result of the pandemic’s negative impact. It presents a myriad of chances, but there are obstacles to overcome in the immediate future.

Despite the effect that Covid-19 had, the Tata Group’s revenue in the most recent three years, which ended in March 2020, increased by 15 percent, going from Rs 6,54,000 crore to Rs 7,53,000 crore. This was accomplished in defiance of the ongoing problems. The company’s net earnings was 47,000 crore in March 2019, up from 33,000 crore in March 2017, but it decreased to 31,000 crore in March 2020. The company’s total net debt rose from Rs. 1,540,000 crore to Rs. 1,96,000 crore as a result of various acquisitions and developments. However, the debt-equity ratio decreased from 1.17 times to 0.96 times over the same time period. From Rs. 8.4 lakh crore in March 2017 to Rs. 17.7 lakh crore in the first week of February 2021, the total market capitalization of listed businesses belonging to the Tata Group increased by more than two times.

Lost Opportunities

The few missed opportunities for the company are in the areas of real estate and housing, as well as financial services. The Tatas were able to learn from the Bajajs’ success in the financial services industry, but they were unable to replicate that success. In 2007, Bajajs separated the financing of two-wheelers industry from Bajaj Auto and launched Bajaj Finance, which is currently valued at Rs 3.35 lakh crore on stock markets. In addition to that, they expanded two insurance companies. In spite of this, Tatas’ joint ventures in the insurance industry with AIA and AIG have been gaining ground in recent years. Chandrasekaran is of the opinion that artificial intelligence and data analytics will be the primary drivers of the financial services portfolio.

The manner in which Godrej built their real estate industry can serve as a model for Tatas to follow.

And despite the fact that Tata was one of the first companies to enter the retail industry, the company has not expanded its retail operations to the same extent that Reliance has. It already has a strong foundation thanks to Westside, Croma, and Star Bazaar, all of which are nearby.

On the shoulders of Chandrasekaran rests the monumental responsibility of reshaping Tata, one of the most established business organizations in India. The first few courageous measures toward reorienting the group have been taken by him, but the majority of the major moves are still in the planning stages. The trajectory that they take from here on out will determine the makeup of the Tata company in the years to come.