Strategising big: how tata group companies stack up

A video on the Tata group website rightly points out that these days the company’s performance is measured on a quarterly basis rather than on a long-term one. Analysts change their view on

a company looking at the quarterly performance without giving much weightage on the long term business outlook. Companies themselves fall in the trap to perform on a quarterly basis missing

out on the big picture. But the Tata’s, who have over the years been admired for the way they conduct their business are now crafting a new strategy and are daring to think on longer term

basis. Nearly a year-and-a-half after new Chairman Cyrus Mistry took control of nearly 100 companies, of which 30 are publicly listed, the group is undergoing a strategic change. VISION 2025

Playing around the word ‘quarter’, the group is now working towards a definite goal for 2025. Rather than deliberating on sales and profits of each company in the group, Mistry has made a

broad vision of the group touching the lives of 25% of the world’s population by 2025. That’s around two billion people the group wants to touch as compared to around 900 million as per its

own estimates. So how will the change occur? And more importantly, from a market perspective, which are the companies that will drive the outreach? Before we look at the companies there are

some more ‘quarters’ to deal with in the group’s vision statement. _The Economic Times_ has reported that Mistry wants the Tata group to feature in the global top 25 by market

capitalisation; presently it is in the wrong side of 70s. Furthermore, Mistry wants 25 industry leaders in the group. Currently its IT giant TCS is the only leader in the industry. TCS

GROUP’S BREAD EARNER In fact, TCS accounts for nearly 68% in value terms (market capitalisation) of the total value of Tata group, in the listed space. Out of Tata group’s total worth of Rs

726,657 crore, TCS’ contribution is Rs 496,351 crore. TCS’ importance to the group can be judged from the fact that the company’s dividend of Rs 15,474 crore was around 87% of the total

dividend announced by all the Tata group companies. Tata Sons, the parent company which holds 74% of TCS, pocketed Rs 11,450 crore. Though TCS is the most valuable company in the group

giving the highest dividend and generating the highest profits, on other parameters it does not rank as the top company in the group. As per data collated from ACE Equity, we have provided

the top 10 Tata group companies based on various parameters. Despite having nearly 100 companies under its umbrella the group gets most of its profit from two companies. Of the top 10

profitable companies, TCS and Tata Motors account for 91% of the profits. TCS alone contributes more than half the profits. These are the only two companies that have a profit of over Rs

10,000 crore. GROOMING FUTURE LEADERS Some might say that for a group that was started way back in 1868, the numbers are not too exciting. However, one must remember that the Tata’s are

among the handful of business houses in the country that have survived so long. But Mistry does not want the Tata’s to be a survivor, he is looking for leadership position for his group

companies in the industry they cater to. With a decade to go before achieving this goal, the Tata’s are grooming the next round of leaders who will spearhead this growth. Though the numbers

in the tables do say it, a number of Tata group companies have made their mark globally. Like Tata Communications is the number one international wholesale voice provider. Tata Steel is

among the top 15 steel producers in the world. Tata Motors is among the top 10 commercial vehicle manufacturers globally. Tata Global Beverages is the second largest tea company in the world

and Tata Chemicals is the world’s second largest manufacturer of soda ash. And of course, TCS is the second largest IT company by market cap and profit. In the days ahead, we might see

consolidation within the group as each company fights for pole position. But the road ahead will be tough. There are too many competitors in each of the industry that the group is in. A

CONGLOMERATE WITH A HEART Irrespective of where the group stands by 2025, very few conglomerates across the globe can boast of the shareholding of its parent company, Tata Sons. OF Tata

Sons’ share capital, 66% is held by philanthropic trusts which support education, health, livelihood generation and art and culture. That is one leadership position that few can equal. _(The

writer is a Mumbai-based market analyst) _ Published: 25 Sep 2015, 6:26 PM IST