Lot of heavy lifting needed in Air India, expect visible progress in 12-24 months: N Chandrasekaran
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What is your assessment of Tata Group’s performance in last five years? You had stated when you took charge that businesses should earn their right to working capital and generate enough profits within a stipulated period to fund growth plans. How do you think the bigger companies have fared?
Tata Sons and group companies are today in a good space. Fundamentally, all initiatives we undertook had three pillars: strengthen the core, transform the core and create future businesses. We followed a combination of principles and strategies over the last five years where we said fitness first, performance next; and we capitalised all our companies. Second, we said we want to simplify, synergise and scale. Third, we said, it has to be ‘One Tata’.
Each of these companies today has a simplified structure which may not be visible from the outside, but there is a clear focus in terms of the number of businesses they are in, the number of entities they have and the geographies they are present in. So, across companies, whether in or , synergistic businesses have come together in, say, Tata Consumer or a defence company, or the way companies got together to launch an EV. That is the collaboration, synergy and ‘One Tata’.
is a huge turnaround story. Earlier, every big Tata company – whether Tata Power, Tata Motors or Tata Consumer – used to have a negative story around it. Today, that conversation has changed, and every company has a positive story. I am proud of how all these companies have staged a turnaround backed by synergies. Scale is something visible across companies, whether in terms of capacity expansion, number of stores in retail formats, capacity expansion in automobiles or aspiration in renewable energy.
We have also initiated a transformation of the core on four themes: digitalisation, sustainability, supply chain resilience,wellness and safety. Digitalisation is a journey where every company thinks data first. A sustainable transformation is the market transition we are making whether in EV or fuel, renewable energy and carbon capture and the huge commitment towards biodiversity and water consumption. We have a comprehensive plan across the group to be net zero by 2045, and every company has a goal in terms of all these dimensions.
Air India’s acquisition by Tatas had every Indian cheering. But the challenges to make it operationally viable are huge.
For us, Air India is a hugely important business and not just an emotional investment. We are determined to do all we can to make it work. I am directly spending a lot of time on Air India. But there are lots of issues that need heavy lifting. There is no magic wand… A lot of work needs to be done on IT systems, processes, maintenance, fleet, ground handling, HR, training, network planning. We are working on all dimensions.
We have allocated significant capital for Air India of about ₹15,000 crore in terms of equity alone. We are fixing issues in a systemic way, and there will be no temporary fixes. We are working on the reorganisation of Air India through talent, training, deployment of IT systems to offer better products with a modern fleet and ground handling through data analytics.
Execution, designing, customer service and how to differentiate all our lounges need to be reworked. All this requires commitment and passion, and it won’t happen overnight, but we are on the job. People at Air India are also willing to do everything to make it work. There is a lot of pride in the national carrier, and they are very happy that it has come to Tatas.
We want to make Air India the flagship company, and a financially viable one. In the next 12-24 months, there will be visible progress.
“Capital deployment in group companies has been robust. Tata Sons alone infused Rs 80,000 crore in all companies in 5 years just to strengthen balance sheets. Additionally, we made secondary market purchases of about Rs 10,000 crore. We infused an additional Rs 20,000 crore into new businesses… Today all companies have strong balance sheets, and we do not see the need for Tata Sons to infuse any further capital into any of the operating companies”
How does the operational structure work for the group’s aviation business? What is the update on Vistara’s plans to be part of one entity?
Air India will be our flagship airline company. Our low-cost airlines – Air India Express and AirAsia – are getting merged. I do not want to comment on Vistara now, that will be taken care of at the right time. As of today, we have not taken any decision on whether we want to have a single airline or two airlines.
What is the kind of capital allocation done till date in older and new businesses?
The capital deployment in group companies has been robust. Tata Sons alone infused ₹80,000 crore in all companies in five years just to strengthen the balance sheets. Additionally, we made secondary market purchases of about ₹10,000 crore. We infused an additional ₹20,000 crore into new businesses. Today, all companies have strong balance sheets, and we do not see the need for Tata Sons to infuse any further capital into any of the operating companies.
We have made serious commitments to five businesses – Tata Neu, Air India, semiconductors and electronics, 5G and batteries. If there is a good business idea, we can take it up because we have the bandwidth.
From Tata Sons’ point of view, most investments have been done in established businesses and now it will focus on future businesses. We have made serious commitment to new businesses and all five have to deliver.
The consumer app is in production, we are working on Air India, there is a lot to be done. Electronics is in the works, it is already operational and commercial shipments have begun and that will be scaled up. 5G has got the solutions proven in the lab, 4G has been proved and we are looking at commercialising the solution; 5G and 4G need time to scale.
How is Tata Neu – the consumer app – progressing. Have you met external investors for this business and placed a business valuation?
Tata Neu has a pipeline of categories and it has a lot of work to do in the next 12-24 months. We have a strong value proposition, and it has pivoted on ‘NeuPass’. We have an app in production and there are new categories and things we are working on. Execution will be key. We are focused on creating a best-in-class consumer platform. We are not capital constrained for the consumer app and have not done any official valuation of the business. Everything happens at the right time, like it did with renewable energy or EVs. When the time is right, we will get investors for the consumer app too.
When we got an external investor in Tata Power Renewables, it wasn’t because we couldn’t afford $600-700 million. We felt that getting credible investors into the business is important. So, whenever such situations arise, we will do it. But we are not in a hurry. Unfortunately, there are a lot of opinions and gossip on the subject. Whenever we raise money, it has to make sense to us for the value we think we can create. If there is synergy, we will get in a strategic partner or we may get just a financial partner. The important thing is to drive every business with a purpose.
Every CEO in Tata Group is talking about shareholder returns as a key performance metric. Which other firm apart from do you expect to contribute in a significant manner to Tata Sons?
The long-time criticism that Tata Group’s growth weighs heavily on TCS is not correct anymore. All companies now contribute significantly to the group’s growth. It is possible now because all of us are aligned and huddled together, and each management is focused on goals, aspirations and performance.
TCS was always a cash-generating business and Tata Sons has a 73% holding in it. Each company has a different type of holding. This year, Tata Steel produced so much cash and contributed so much to profits, and I believe Tata Motors will do the same. Operationally, it is doing very well and there is huge demand, but they are facing a semiconductor crisis.
Our financial services business, Tata Capital, is doing very well, our general and life insurance businesses all are on a good wicket. Some of them have to scale, but look at from where they have come since last four years. Look at the market capital of Tata Consumer in the last four years. But you cannot compare one company with a TCS. That is unfair.
One has to look at a company in their context. The market share of Tata Motors has grown from 4.5% to 14%. It is an absolute dream run. Forget the market share and look at the commentary around Tata Motors. That it is making likeable and more stylish cars. EV has changed the way consumers look at Tata Motors. That, for me, is of far more value. Financials will follow; it is more important to get the consumer and the market believing in what you do.
After telecom, I was told by everyone to exit the passenger car business. But we felt there was a lot of potential in the PV (passenger vehicles) business. It is not that we have arrived, and we do have a long way to go. But now we have a strong portfolio of products and there is a marked difference in how Tata Motors is viewed.
Similarly, Tata Power will also generate a lot of returns, but they have huge expansion plans and will keep investing that in growth.
The change in commentary is visible. Every one of our businesses –
, Tata Power, Tata Consumer, – are powerful growth companies. With a clear strategy, adopting digital, focus on cash flows, simplified and strong balance sheets, focus on core, these companies have high growth aspirations. We have got the right talent, and sharper focus on customer centricity. And still there is work to do. We have to go from where we do not have consumer complaints to getting their suggestions and not disappointing them.
How is JLR performing on these fronts?
JLR is doing a lot in terms of optimising operations and its break-even levels have come down significantly. JLR has pivoted on the strategy to go electric. By 2025, all Jaguar vehicles will be electric. All Range Rover vehicles will be electric and hybrid by 2025. By 2030, 60% of JLR will be electric, and by 2039, it will be net zero. There is a massive transformation happening at JLR, and while it is stuck on account of a shortage of semiconductors, volumes will shoot up once that eases. Our automobiles business will have three distinct pillars – PV (passenger vehicles), CV (commercial vehicles) and JLR, run by separate CEOs who are leading the transformation.
What are Tata Sons’ ambitious plans around electronics and semiconductors?
Creating resilience in the global supply chain is a big theme and we have identified it as an opportunity. We are in the phase of building our electronics business and are focused on building precision manufacturing; next will be packaging, assembly and testing. We have been doing extensive diligence on semiconductors because it’s a tough business. Electronics is in the works, it is already operational and commercial shipments have begun, and that will be scaled up. 5G has got the solutions proven in the lab, 4G has been proved and we are looking at commercialising the solution. 5G and 4G need time to scale. We will also manufacture car batteries and continue to build along the value chain, such as cell phones. We are committed to invest and build a global business.
Is there a rethink on the business model of Tata Medical?
Tata Medical & Diagnostics was announced, and Covid came in. We set it up at a time when there was a fear the country will need more ventilators and so we tied up with Medronic for ventilators, but then that fear abated. Then, there was a big need for testing, so we focused on creating testing facilities. These were tactical decisions in a unique situation. We have to rethink the business and we know there is potential, but it will be a largely B2B business.
The strategy of Tata companies seems largely India-focused? Where do international markets figure in the plan?
We have exited smaller markets and there will be no significant expansion plans outside of India. At the same time, our 5G and electronics businesses will be global, and Air India will have a global footprint.
Why does the Tata Group not have more women in leadership roles?
We have to work on it. That is another top priority. It is easier to get women into the workforce, but the real challenge is to ensure they are at leadership levels. And we intend to do that.
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