Tata Group – The Globally Local M&A Strategy
Anjal Agrawal
M&A and Strategy at Virtusa || Ex-IB at Nomura (PPO) || IIM Shillong (17-19) || CA || Yes Bank FutureReady Scholar || Ex-JPM || Ex-Baker Tilly DHC || #ProudSINKWAD
Ratan Tata's appointment as chairman of the Tata Group in 1991 coincided with the year when India launched?economic reforms. At the time, globalisation was a new concept in India. Ratan Tata took the lead not only in big acquisitions but also in changing the mindset of India's top business leaders.
Beginning with Tata Tea's acquisition of Tetley in 2000, Tata went on a shopping spree acquiring as many as 36 companies in just 9 years. Among them, the most noteworthy acquisitions were the Tetley acquisition by Tata Tea, Tata Steel's takeover of Anglo-Dutch steel maker Corus, and the British automobile marquee Jaguar and Land Rover by Tata Motors. Ratan Tata became the poster boy for leading the Tata group towards a daring 'reverse colonialism.' The new India was poised for global supremacy and Tata was spearheading 'The Global Indian Takeover'.
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History of Tata Empire
Jamsetji Tata founded the business in 1868, starting as a commerce firm before branching out into other sectors. He bought a bankrupt oil mill at Chinchpokli and converted it into a cotton mill, under the name Alexandra Mill which he sold for a profit after two years. In 1874, he set up another cotton mill at Nagpur named Empress Mill, in an attempt to develop trade with China.
Jamsetji Tata dreamed of achieving four goals, setting up an iron and steel company, a unique hotel, a world-class learning institution, and a hydroelectric plant. In 1903, Jamsetji Tata commissioned The Taj Mahal Hotel at Colaba waterfront, making it the first hotel with electricity in British India. His older son and successor, Dorabji Tata became the chairman in 1904. Dorabji established the Tata Iron and Steel Company (TISCO), now known as Tata Steel in 1907. Western India's first hydro plant was brought to life, giving birth to Tata Power; and the Indian Institute of Science was established with the first group of students admitted in 1911.
Post achieving the founder’s goals, Tata Group marked the group's global ambitions with its first overseas office in London.
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The Pioneer for Employee Welfare Measures
In the early 1900s, Tata Group pioneered many of the employee welfare measures that we take for granted today, including eight-hour working days, safe work spaces, provident fund, leave with pay and gratuity.
Since the inception of the Tata Group, Jamsetji Tata offered his people shorter working hours, well-ventilated workplaces, a crèche for young mothers, and provident fund and gratuity long before they became statutory in the West. He installed the first humidifiers and fire sprinklers in India. In 1886, he instituted a Pension Fund, and in 1895, began to pay accident compensation. Jamsetji Tata was decades ahead of his time and miles ahead of his competitors.
Tata Steel also pioneered several labour welfare benefits. These include an eight-hour working day, free medical aid, establishment of a welfare department, leave with pay, workers' provident fund scheme, workmen's accident compensation scheme, maternity benefits, profit sharing bonus and retiring gratuity. It is hardly surprising that the company hasn't seen a single strike since 1929.
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Ratan Tata – The Charismatic Leader
Ratan Tata is the prodigy behind the success of one of the largest conglomerates in the world, Tata Sons, the holding company of the Tata Group. Ratan Tata is the great-grandson of Jamsetji Tata. After studying Architecture with structural engineering at Cornell University and completing the management program at Harvard Business School, he joined the Tata Group in 1962. He was appointed as the chairman of Tata Sons in 1991. In this period of chairmanship, he has not only shaped India’s biggest conglomerate but also contributed towards the wealth of the nation.
Ratan Tata was awarded Padma Vibhushan in 2008 (2nd highest civilian award in India), Padma Bhushan in 2000 (3rd highest civilian award in India) and 26th Robert S. Hatfield Fellow in Economics by Cornell University, which is considered the highest honour the university awards to distinguished individuals from the corporate sector.
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The Tata Empire
Tata Technologies
In Nov-23, Tata Group launched its first IPO in nineteen years in the form of Tata Technologies’ IPO.
Tata Technologies is a leading global engineering services provider, catering to the rising need for next-gen technology, especially in the automotive segment (70% of Tata Tech’s FY23 revenue). It offers outsourced engineering and digital transformation services (80% of Tata Tech’s FY23 revenue); and resells third-party software applications and services to educational institutions (20% of Tata Tech’s FY23 revenue). Tata Motors accounted for 55% of FY23 revenue.
On the day of the IPO, Tata Tech was listed at a premium of 140% over its issue price. The issue saw a huge demand across all the categories of investors commanding an overall subscription of 69.43x. The portion for qualified institutional bidders (QIBs) was subscribed a stellar 203.41x, while the portion reserved for retail investors and non-institutional investors was booked 16.5x and 62.11x, respectively.
Post the successful investor participation in Tata Tech, Tata Group has begun talks to list its auto component manufacturing business, Tata Autocomp Systems. Besides Tata Autocomp Systems, the Tata group is also planning to launch the IPOs of Tata Play (formerly Tata Sky), BigBasket, and the group's parent company Tata Sons.
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领英推荐
Tata Neu – The Super App
Tata Neu, which went live on Apr-22, draws inspiration from China’s Alipay and WeChat. It is a “super app” that brings together various consumer services such as hotel and flight reservations, grocery and electronics, and pharmaceuticals under one umbrella. Tata Digital is the parent company of Tata Neu and is responsible for operating the flagship online platform.
Tata Digital undertook an acquisition spree and acquired names such as grocery delivery startup BigBasket and epharmacy platform 1mg; and along with other Tata-owned brands, such as Croma, CLiQ, Titan, Tanishq, Westside, and Air India, consolidated them all on its super app – Tata Neu. On the other hand, Reliance already appears to have a well-oiled super-app machine in the form of MyJio, that features a bundle of over 20 consumer-focused mini-apps, including services such as UPI payments, various entertainment mini-apps, and more.
Failed aspirations? The app was criticised for having multiple glitches, poor user experience and other challenges at the time of its launch. Since then, the app has reportedly not picked up a considerable pace and is yet to gain any significant market traction. Tata Group has directed Tata Digital to optimise the operations of the super app and address any app glitches to enhance user-friendliness.
The Revamp: After the IPL 2023 season, the newly-revamped Tata Neu app hit 60m cumulative downloads (13m during the IPL) and 75m members in their NeuPass rewards programme (web + app). Given that the Tata Group was the title sponsor of IPL 2023 and the Neu app was heavily promoted during the matches, these numbers are not a surprise. Any such campaign is bound to bump up app downloads and bring in first-time users. However, improvements have been seen on the app in terms of app ratings, retention, customer experience, category discovery, customer rewards and membership programme and contextual personalisation.
What next? Tata Group is considering an additional $1bn investment in Tata Neu. It wants Tata Neu to emulate competitor Reliance Retail’s strategy of raising big-ticket funding from global sovereign and financial investors such as Qatar Investment Authority, Abu Dhabi Investment Authority (ADIA) and KKR. The proposed capital infusion is in addition to another $2bn that the digital unit has raised from Tata Group in 2023.
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M&A Approach: Tata vs. Reliance
When it comes to globalisation by Indian companies, the Tata Group?is the first name that springs to mind. Right from humble beginnings when its founder, Jamsetji Tata started his business career in 1868 trading with China, the Tata group has always had a global outlook. Ratan Tata followed this vision of taking the Tata group global, & in turn, created an international empire.
By contrast, the Reliance group's much more 'India-focused' strategy. Reliance has invested more in India, in line with its conviction on India's demographics leading to far more sustainable growth than that of the rest of the world.
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This article is an introduction to my upcoming series “Tata Group – The Globally Local M&A Strategy” comprising 7 case studies across their different group companies – Tata Tea <> Tetley; Tata Aviation <> Air India; Tata Electronics <> Wistron; Tata Steel <> Corus Group; Tata Motors <> Jaguar Cars and Land Rover; Tata Consumer <> Capital Foods and Organic India; and Titan <> Caratlane.
Until then, thank you for your time. Please post your feedback and comments.
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Please find below all the information sources that have been instrumental to the above article, along with some additional reading materials. Gratitude to all the creators –
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