Tata Group: A Comprehensive Overview

Table of Contents:

1. Introduction
2. History and Evolution of Tata Group
 Founding and Early Years
 Expansion into Diverse Industries
3. Organizational Structure
 Tata Sons and Holding Companies
 Key Subsidiaries and Affiliates
4. Corporate Philosophy and Values
 Tata’s Ethical Standards
 Commitment to Social Responsibility
5. Tata’s Global Presence
 International Expansion
 Major Global Acquisitions (Jaguar Land Rover, Tetley, etc.)
6. Key Products and Services
 Automobiles
 Tata Motors: Cars, Trucks, Electric Vehicles
 Jaguar Land Rover
 Steel
 Tata Steel: Products, Innovation, Sustainability
 Information Technology
 Tata Consultancy Services (TCS): IT Services, Software, and
Consulting
 Retail
 Trent Limited: Westside, Zudio
 Titan Company: Watches, Jewelry, Eyewear
 Consumer Products
 Tata Consumer Products: Beverages, Packaged Foods
 Chemicals
 Tata Chemicals: Products, Sustainability
 Power and Energy
 Tata Power: Renewable Energy, Solar, Infrastructure
 Infrastructure & Real Estate
 Tata Housing, Tata Projects
 Aerospace and Defense
7. Sustainability and Corporate Social Responsibility (CSR)
 Tata's Environmental Initiatives
 Social Contributions: Tata Trusts
 Education, Healthcare, Rural Development
8. Leadership and Governance
 Key Leaders: Ratan Tata, Natarajan Chandrasekaran
 Governance Structure and Ethical Standards
9. Financial Performance
 Revenue and Profit Trends
 Key Financial Metrics and Annual Reports
10. Challenges and Future Outlook
 Market Competitiveness
  Technological Disruptions
 Sustainability in a Changing World
11. Conclusion
 Introduction:-
The Tata Group, founded in 1868 by Jamsetji Tata, is one of India’s oldest and most
respected conglomerates. A global powerhouse, it operates in over 100 countries
and is a name synonymous with ethical business practices, innovation, and
sustainability. The group’s diverse portfolio includes products and services in
industries such as automobiles, steel, information technology, retail, power,
chemicals, aerospace, and more. Tata Group’s strategic vision is guided by its
commitment to not only generating profits but also contributing positively to
society.

With annual revenues exceeding $100 billion, the Tata Group is one of the largest
conglomerates in the world, and its corporate structure comprises more than 100
subsidiaries. Its ethos emphasizes a balanced approach towards business growth,
societal development, and environmental sustainability.

In compliance with corporate values and ethics for 150 years, Tata Group is India’s
most admired company. Tata Group hires approximately 750,000 employees in the
world, comprising over 100 affiliates across ten verticals such as IT, steel,
automotive, consumer and retail, infrastructure, financial services, aerospace and
defense, tourism and travel, media, and trading and investment.

Operating in more than 100 countries, Tata Group recorded a revenue of USD 106
billion in FY 2019-20. Founded by Jamsetji Tata in 1868, Tata Group started his first
trading firm and evolved into the first enterprise that pioneered India’s
infrastructure industries like steel, power, services and aerospace.

Its pioneering spirit has been showcased by global companies such as Tata Motors,
which made India’s first indigenously developed car, INDICA; Tata Steel, Asia’s first
private steel maker; and Tata Consultancy Services (TCS), India’s first software
company.

Tata Group believes that its profits earned from corporate activities should be
given back to society which it serves. Tata Sons, the principal investment holding
company of Tata Group, set up philanthropic institutions Tata Trusts, which have
been engaged in charitable activities in the fields of education, healthcare,
livelihood support for vulnerable households, and arts and culture.

Every year, Tata Group provides support for social development. It has laid a firm
foundation for the backbone industries in India and has played a leading role in
modernizing industries of India. Tata Group continues to grow as India’s most
admired company as well as globally recognized company.

Tata Group’s Headquarters Bombay House (Mumbai,

India)
Taj Palaces (India’s largest hotel chain)
The tata group is an Indian multinational conglomerate
headquartered in Mumbai. Established in 1868, it is India’s
largest conglomerate, with products and services in over 150
countries, and operations in 100 countries across six
continents Acknowleadge as the founder of the Tata Group,
Jamsetji Tata is sometimes referred to as the “FATHER OF
INDIAN INDUSTRY”..
History and Evolution of Tata Group

Founding and Early Years

The Tata Group was founded in 1868 by Jamsetji Tata, a visionary

businessman who sought to build an industrial empire that would
contribute to India’s development. Jamsetji Tata’s first major venture was
establishing a cotton mill in Nagpur, India, which became a key player in
the Indian textile industry. However, his true legacy lies in his vision for
long-term industrial growth and nation-building.

Jamsetji Tata envisioned several groundbreaking institutions, including

the establishment of India’s first steel plant, the Tata Steel Company, and
the creation of the Indian Institute of Science in Bangalore, which would
be a beacon of education and innovation.

Expansion into Diverse Industries

Under Jamsetji’s leadership and the subsequent stewardship of his son,

Sir Dorabji Tata, the group expanded into several key industries. Tata
Steel, founded in 1907, became the first steel plant in India, and its
impact was felt across the Indian economy. In the 20th century, Tata
diversified into automobiles with Tata Motors (formerly TELCO),
chemicals with Tata Chemicals, and power generation with Tata Power.

Key Milestones and Strategic Acquisitions

 1910: Tata Power is founded, marking the group's foray into energy.
 1945: Tata Chemicals, involved in manufacturing soda ash, is established.
 1980s–2000s: Tata Motors begins producing cars, including the iconic Tata
Indica, and the company later expanded with acquisitions such as Jaguar
Land Rover.
 2000: Tata Consultancy Services (TCS) becomes a pioneer in IT services, laying
the foundation for Tata’s global tech presence.
 2008: Tata Motors launched the Nano, the world's cheapest car, a game-
changer in the automobile industry.
 2008: Tata Steel acquired Corus, a global steel giant, expanding its
international presence.
The largest Indian conglomerate… Started in 1868 by Jamsetji Tata as a trading
company, the Tata Group has grown to become among the largest industrial groups
in India with a presence in multiple segments. The Group's operations cover most of
the key industries including technology, automotive, telecom, infrastructure, power,
defence and retail. Tata Group companies such as TCS (IT services), Tata Motors
(commercial vehicles), Tata Steel (steel), Voltas (air conditioners), Titan (jewellery)
and Tata Global Beverages (tea) are amongst the market leaders in their respective
categories. The Group had a total revenue of over US$100 bn in FY16 and an
employee base of over 660,000. The Tata Group has a presence in these diverse
segments through a large number of group companies (about 100 including
subsidiaries), of which over 20 are publicly listed in India. These (listed) companies
have a combined market capitalisation of over US$125 bn, and it has increased by
11% over the last three years versus the 27% rise in the Sensex. The Group's
ownership in companies is mainly through Tata Sons. Several Tata Trusts hold 66%
stake in Tata Sons, the holding company. Tata Sons has holdings in each of the Tata
Group companies directly as well as through its subsidiaries. …with a global
business… While the group expanded its operations by entering into new segments
domestically, international expansion began under the leadership of Mr Ratan Tata
(he was the Chairman of Tata Sons between 1991 and 2012). Tata made several
global acquisitions during his tenure, including Tetley (acquired by Tata Tea in 2000
for over US$400 mn)

Glaceau (30% stake acquired by Tata Tea in 2006 for over US$670 mn,
though sold later);
Corus (acquired by Tata Steel in 2006 for over US$8 bn); and Jaguar Land
Rover
(acquired in 2008 for about US$2.3 bn). Besides these, the IT services
business, TCS,
was growing at a brisk pace, further expanding the Tata Group's global
revenue base.
About 67% of the Group's revenue came from international businesses in
FY16.
…and significant focus on corporate social
responsibility
The Group has had a significant focus on ethics and corporate social
responsibility (CSR)
since the very beginning. For example, Tata Steel introduced eight-hour
working days well
before it became a statutory requirement in most of the Western world, and it
also started
the provident fund scheme in 1920, much before the government regulations
came (in
1952). Many of the companies in the group continue to be perceived as better
places to
work by employees.
A professional leader for the first time at the helm
Historically, the Tata Group has been led by family members of the owners of
Tata Sons
(66% owned by Tata Trusts and 18% owned by Shapoorji Pallonji). The first
five Chairmen
were from the Tata family (Mr. Jamsetji Tata, followed by Mr. Dorab Tata, Mr.
Saklatwala,
Mr. JRD Tata and Mr. Ratan Tata), and the last Chairman (Mr. Cyrus Mistry)
was from the
Shapoorji Pallonji family. Mr. N Chandrasekaran (appointed as the Chairman
effective
January 2017) is the first professional Chairman of the Group and has a
distinguished
track record of leading the most valuable (by market capitalisation) company
of the group
(TCS) for seven years.
Structure of Tata Group

Tata Group is a highly diversified conglomerate with

over 100 subsidiaries operating in multiple industries.
Some of the key areas of operation include:
 Automotive
 Steel
 Information Technology (IT)
 Telecommunications
 Retail
 Hospitality
 Energy
 Chemicals
 Consumer Goods
 Infrastructure
The group operates in more than 100 countries, with its
headquarters in Mumbai, India. It has an impressive
portfolio of companies, some of which are global leaders
in their respective sectors.
Tata Group Products and Services

The Tata Group’s product offerings span several industries.

Below are details of the key business segments, products, and
services:
Automotive

Tata Motors is one of the largest and most recognized

automotive companies in India. The company produces a wide
range of vehicles, from passenger cars to trucks and buses.
Some of the notable products include:
 Tata Nano (previously, a small affordable car)
 Tata Harrier (SUV)
 Tata Tiago (hatchback)
 Tata Safari (SUV)
 Tata Altroz (hatchback)
 Electric vehicles like Tata Nexon EV and Tata Tigor EV.

Tata Motors also owns the British luxury carmaker Jaguar

Land Rover (JLR), which produces high-end vehicles such as
the Range Rover and Jaguar sedans.
Steel

Tata Steel is one of the largest steel producers in the world. It

operates in more than 26 countries and produces a wide variety
of products, including:
 Flat steel products
 Long steel products
 Construction materials
 Automotive steel
 Specialty steels

Tata Steel also has a significant presence in Europe through its

subsidiary Tata Steel Europe.
Information Technology and Software

Tata Consultancy Services (TCS) is the largest IT services

company in India and one of the largest in the world. TCS
provides IT solutions, consulting, and business process services
to clients across industries such as:
 Banking and Finance
 Telecommunications
 Retail
 Healthcare
 Energy

TCS has been a leader in digital transformation, cloud

computing, and data analytics. It is known for its innovative use
of artificial intelligence (AI) and machine learning (ML).

Other IT-related subsidiaries include Tata Elxsi (which focuses

on software development for embedded systems and automotive
technologies) and Tata Technologies (offering engineering and
design services).
Telecommunications

Tata Communications is a global player in the

telecommunications industry, providing a range of services
including:
 Voice and data services
 Cloud infrastructure
 Cybersecurity
 Video conferencing and collaboration tools

Tata Teleservices, formerly a part of the group, has been a

significant player in India’s telecom sector. It offers mobile
services under the brand name Tata Docomo, although the
company has been transitioning its business to focus on
enterprise solutions.
Retail

Tata Group has an extensive presence in the retail sector,

primarily through Tata Group’s Retail Business. Some key
retail chains include:
 Tata Trent (operates Westside, a fashion retail brand)
 Tata Consumer Products (which sells food and beverages under
the brands of Tata Tea, Tata Salt, Tata Coffee, and Tata Biscuits)
 Croma (consumer electronics and appliances)
 Starbucks India (a partnership with Starbucks Corporation)

Energy and Utilities

Tata Power is one of the leading players in India’s energy

sector. It generates and distributes electricity across India and is
also actively involved in renewable energy, including solar
power projects.

Other key players in Tata’s energy sector include Tata Oil and
Gas and Tata Chemicals, which focus on the production of
chemical products and natural gas.
Hospitality

Tata Group operates in the hospitality industry through Indian

Hotels Company Limited (IHCL), which is best known for its
iconic Taj Hotels. Some notable offerings include:
 Taj Hotels
 Vivanta
 Ginger Hotels

These brands are widely recognized for their luxury offerings,

with Taj being particularly well-known worldwide.
Key Subsidiaries of Tata Group
Tata Consultancy Services (TCS)

TCS is a major player in the global IT services industry,

providing IT solutions, consulting, and business services. It is
the largest company in the Tata Group by market capitalization.
Tata Steel

A leader in steel production, Tata Steel has operations in India,

Europe, and Southeast Asia.
Jaguar Land Rover

The British luxury carmaker that Tata Motors acquired in 2008.

It produces high-end luxury vehicles like Range Rover and
Jaguar.
Tata Power

An energy company involved in the generation, transmission,

and distribution of power, with a focus on clean energy
initiatives.
Tata Chemicals

A global chemicals manufacturer, producing a wide range of

products, including fertilizers, chemicals, and consumer goods
like Tata Salt.
Tata Global Beverages (TGB)

This subsidiary focuses on beverages, and the company's

product line includes Tata Tea, Tetley, Tata Coffee, and Tata
Water.
Tata Consumer Products

This subsidiary handles consumer goods, including food

and beverages. It includes brands like Tata Salt, Tata
Tea, Tata Coffee, and Tata Biscuits.

Corporate Social Responsibility (CSR)

The Tata Group has a strong reputation for its
commitment to social causes. Tata Trusts, which control
much of the Tata Group, is involved in numerous
charitable activities and community development
projects, including:
 Tata Memorial Centre: A leading cancer treatment
and research center.
 Tata Education and Development Trust: Focuses
on education and healthcare initiatives.
 Tata Institute of Social Sciences (TISS): One of
India’s leading social science institutes.
 Environmental Sustainability: The group focuses
on sustainability across its businesses, including
renewable energy, eco-friendly manufacturing
processes, and community-driven environmental
initiatives.
Future Projects and Growth Strategies
Tata Group’s Vision for the Future

Tata Group is focused on driving innovation,

sustainability, and global expansion in its future
strategies. Here are some key future projects and
initiatives:
 Renewable Energy Expansion: Tata Power is
focusing on expanding its renewable energy
capacity, particularly solar energy, to align with
global energy transition goals.
 Electric Vehicles: Tata Motors is increasingly
focusing on electric vehicles (EVs) as part of the
Indian automotive industry’s push toward
sustainability.
 Digital Transformation: TCS and Tata Group’s other
subsidiaries are heavily investing in digital
transformation, AI, cloud computing, and big data
analytics.
 Green Technology: Tata Group aims to expand its
efforts in green technologies and clean energy
solutions, with a focus on minimizing
environmental impact.
 Global Market Expansion: Tata Group is expanding
its global footprint in sectors such as technology,
automotive, and hospitality, targeting growth in
emerging markets.
 Looking ahead, Tata Group is committed to continuing its
growth trajectory, with a focus on several critical
strategic areas:
 1. Electric Vehicles and Clean Energy

 Tata Motors has set ambitious goals for

expanding its electric vehicle offerings, aiming
to become a key player in India’s EV market.
Tata Power will focus on building charging
infrastructure for EVs, contributing to the shift
towards cleaner and greener transportation.
 2. Digital Transformation and AI

 Tata Group will continue to invest in digital

technology, artificial intelligence, and machine
learning. TCS and other subsidiaries are
working to offer advanced solutions in cloud
computing, big data analytics, and IoT to help industries
optimize their operations and business processes.
 3. Global Expansion

 The Tata Group will likely continue its international

expansion, particularly in sectors such as IT, automotive,
and hospitality. This expansion will likely be supported by
the growth of digital platforms and increased demand for
high-quality products from emerging markets.
 4. Sustainability

 Tata Group's sustainability strategies will likely become

even more ambitious. The group aims to reduce its
environmental impact across its industries, using clean
technologies and promoting sustainable business practices.
The emphasis will be on creating a circular economy and
reducing carbon emissions.
Challenges and Opportunities
Tata Group faces several challenges, such as increased
global competition, evolving market demands, and
regulatory hurdles. However, it also has numerous
opportunities:
 Innovation: Leveraging technology and digital
transformation to remain competitive.
 Sustainability: Positioning itself as a leader in
sustainability and green technologies.
 Geographic Expansion: Expanding its footprint in
emerging markets, especially in Africa and Asia.
 Consumer Goods: Strengthening its position in the
consumer goods market through new product
innovations and expanding its retail offerings.
Tata Motors: Domestic business turnaround can
offer upside

Tata Motors' domestic PV business currently makes losses (due to

a low market share,
and hence, lower capacity utilisation) and the CV business has lost
significant market
share. The domestic business' margins are currently close to 4%
vs 15% for Maruti and
12% for Ashok Leyland, and there is a significant gap in the
volume growth as well (Tata Motors' domestic volumes grew at -
1% over the last three years vs 11%/23% volume

CAGR for Maruti/Ashok Leyland). Tata Motors' domestic business

currently gets a lower
multiple (8x FY19 target EV/EBITDA for our SOTP valuation) than
its peers (13x for Maruti
and 10x for Ashok Leyland), given weaker fundamentals.
Any improvement in this business (higher market share in
passenger vehicles, protection
of market share in commercial vehicles and material margin
expansion—close to Maruti
and Ashok Leyland) can lead to an earnings upgrade as well as
rerating. This could add a
significant value to the domestic business that currently accounts
for just 13% of our
SOTP (or US$3.6 bn in absolute terms vs the market cap of
US$35 bn for Maruti and
US$5 bn for Ashok Leyland).
We have an OUTPERFORM rating on the stock, with a TP of
Rs630. FY17-19E earnings
CAGR will be strong (from a low base) at +70% (helped by
platform consolidation, strong
momentum in Land Rover). The JLR business is currently trading
at 3x FY18E
EV/EBITDA, and our estimates do not factor in any significant
recovery in the domestic
business.
Incremental value for Tata Motors
We have tried to understand what is the kind of incremental value
that can be created if
some of these decisions get the desired results. We believe the
key upside on Tata Motors
can come from a turnaround in the domestic business. The recent
change of guard at the
CV business is a good sign as it signals a strong intention.
However, more needs to be
done especially in terms of filling white spaces and making the
organisation agile to
respond quickly to market changes. For this scenario, we assume
a 15% CAGR in CV
volumes in two years on the back of market share improvement.
We believe that could
also warrant an increase in multiples from 8x to 9x and could
provide a Rs50/share
upside. Its financing subsidiary, Tata Motors Finance has not been
run properly and has
had large asset quality issues. We believe if it is run properly, it
can easily trade at a 30%
ratio to AUM (currently the more expensive NBFCs trade at 60% to
80% ratio). We reckon
the valuation of the China JV can be improved by setting a
benchmark for the same by
listing it on the HK stock exchange like Brilliance. These two
initiatives could provide an
additional Rs50/share and hence a total Rs100/share incremental
upside is possible
Tata Steel: The European business turnaround can
improve returns significantly
An EU turnaround, if properly executed, can make the
European business self-sufficient
and may improve the overall returns significantly. The
company has already moved its
active employees in the UK from a defined benefit pension
plan to a defined contribution
plan. Additionally, steps to de-link the pension fund from
the scheme sponsor are
separately under way. That should pave way for an
eventual JV with ThyssenKrupp, and
possibly help the business become self-sufficient. The
ThyssenKrupp synergy is hard to
quantify, but looking at the last four major EU deals, (our
European team believes 13 July 2017
Tata Group
51
~US$24/t of synergy may come through cost savings,
market consolidation and better
utilisations). This could potentially add ~Rs100/ share to
Tata’s current market price
In the India operations, we may see a capex breather for
some time (key to deleverage
balance sheet) before Tata embarks on the Kalinganagar
expansion (potentially adding
another 3-5mt of capacity at a very efficient sub-US$500/t
of capex).
We have an OUTPERFORM rating on the stock, with a TP
of Rs650. We expect the global
steel cycle to remain supportive: (1) While China’s steel
demand will gradually moderate, it
will still remain strong in the near term, supported by 15-
20% growth in infrastructure
investments, (2) policy remains broadly supportive ahead
of the 19th National Congress of
the CPC, and (3) inventory levels have corrected in the
last three months, and we see
upside risks to the raw material prices (iron ore, coking
coal). With this backdrop, the
ongoing restructuring in the EU operations (pension de-
linking, likely JV with
ThyssenKrupp) could further de-risk future cash flows and
yield synergies.
Incremental value for Tata Steel
We start with a base case of 12.5 mt domestic output at
US$160/t (Rs10,400/t) of EBITDA
for the domestic operations and 10.2mt of EU sales at
US$60/t of EBITDA in FY19.
Assigning the domestic EBITDA a 7x multiple and that for
the EU operations 6.5x, we
arrive at a Rs650 valuation (CS’s current target price).
Synergy from the Tata-TK Joint Venture could be
~US$600 mn (US$24/t for a 25mt
combined capacity). That would add Rs100/share
(assuming a 50% share in the JV and
80% utilisation). The Tata-TK JV talks are still in the initial
phases however (Tata awaits a
full and final pension resolution, though an in-principle
approval from the regulator is
already in place).
The Kalinganagar greenfield project is designed to
eventually ramp up to a 12-15mt
facility. With most infrastructural bottlenecks taken care of,
while executing the 3mtpa
Phase-I (access to road, rail, water, power), the follow-on
capex should come at sub
industry levels of US$900-1,000/t. We believe it could be
as low as US$500/t and thus,
would be immensely value accretive. A 3 mt plant would
add Rs56/share, even if fully
funded by debt, once operational (say three years later).
Adjusting for the time value of
money, it could add Rs40/share.
All of the above could potentially take the fair value up to
Rs740. We see local positives as
well: (1) Anti-dumping duties remain in place till 2021 and
(2) the ongoing IBC proceedings
against five indebted steel makers may lead to industry
consolidation, further helping
supply discipline.
However, one must note the key assumption here, that the
broader steel cycle remains
supportive, with prices in China and elsewhere holding
steady (valuation highly sensitive
to EBITDA/t courtesy financial leverage). Given
uncertainties around the demand in China
(demand should moderate; 2018 won’t be as strong as
2017), we do not build in any of
these benefits (JV synergies/ Kalinganagar expansion
gains) in our fair value at the
moment.
Voltas: Consumer business expansion, demerger of
projects can make Voltas a good consumer play
Being the market leader, Voltas has a strong brand in the
air-conditioner category. The
recent venture into other consumer durable segments (JV
with Arcelik for co-branded
consumer durable products) broadens its consumer
portfolio.
The size of the opportunity is fairly large, and 7% market
share in three years in this
opportunity basket would be equivalent to the current size
of the entire room AC segment.
There can potentially be other products that can add
further upside potential.
Furthermore, if the Electro-Mechanical Projects division is
demerged (into another similar
Group company such as Tata Projects) this can make Voltas
largely a consumer business.
A pure consumer-facing company can also command a higher
value.
We have an OUTPERFORM rating on Voltas with a TP of Rs585
on (1) an attempt at
addressing a large opportunity in consumer durables, (2) strong
AC business performance
including possible benefit from the exit of LG from fixed speeds, (3)
better project segment
outlook, and (4) market valuation of its peers. Our valuation is
supported by segmental
SOTP analysis and uses 33x multiple on FY19E consumer facing
business earnings.
Incremental value for Voltas
Key areas where Voltas can see additional value creation are: (1)
strong traction in the
consumer durables segment, where the company has entered into
a JV with Arcelik to
manufacture and sell consumer durables products; (2) strong
growth in the AC market
leveraging the brand better with Voltas maintaining its ~20%
market share, and (3)
divestment of the engineering and projects business which may
unlock some more value
from that assumed. Voltas is already geared towards introducing
consumer durables
products by Diwali (Sep/Oct) this year. The entry into the
consumer durables segment is
likely to strengthen Voltas' channel presence as the company will
be addressing a higher
share of a consumer's wallet, and will have multiple products to
offer as compared to only
ACs. This, in turn, can have a beneficial effect on the AC business
as well. The sale of the
projects business at an EV/EBITDA multiple of 8-9x assuming
normalised operating
margins can release Rs 28-31 bn of capital. This capital can then
be used to strengthen
the consumer durables business. The sale of projects business will
also improve overall
growth and margins, and offer a cleaner play on Indian consumer
durables business,
where current low penetration levels will ensure sustained growth
over the medium to long
term. This can potentially lead to better multiples for the AC and
consumer durables
businesses. Better operating performance of the AC business and
higher market share in
consumer durables can add an incremental Rs100 per share from
what is already
assumed.
Scenario analysis based on HOLT
(Note: HOLT is not part of Credit Suisse Research.)
HOLT is a value-based, return on capital framework proprietary to
Credit Suisse. HOLT
provides an objective view of over 20,000 companies in 65
countries using a methodology
that examines accounting information, converts it to cash, and then
values that cash,
allowing investors to identify key drivers of value
Overall Group financials likely to improve over the
next two years
Using our estimates and consensus expectations for non-covered
stocks, we believe the
Group's financials should improve over the next couple of years.
As per our calculation,
the Group ROE was 18.5% in FY16, likely to have declined to
below 17% in FY17, and is
expected to improve to over 19% in FY19. The major contributors
to the ROE are likely to
be Tata Motors (we expect ROE to improve from 10% in FY17 to
17% in FY19) and Tata
Steel (from 14% to 20%).
Net debt to equity is likely to trend down as well—from 1.7x in
FY17 to about 1.2x in FY19.
Tata Steel, Tata Motors and Tata Power may likely witness a
better debt coverage. We
expect Tata Steel's net debt to EBITDA to decline from 4.4x in
FY17 to 3.7x in FY19, and
Tata Motors' net debt to EBITDA to improve from 1.2x to 0.3x. As
per Thomson Reuters
consensus estimates, Tata Power (from 6.4x to 5.1x) and Tata
Chemicals (1.4x to 0.5x)
are also likely to witness an improvement.
We do not think analyst estimates factor in any of the major
changes that have been
discussed in this report. If the Group is able to execute on any of
these, the improvement
can be far more significant.
JLR-driven product cycle to drive performance
■
It's a JLR story now. Tata Motors' (TTMT) acquisition of
Jaguar Land Rover
(JLR) in 2008 has worked out very well for the company,
in our view, and now
~85% of the company's value is attributed to JLR. The
stability provided by
Tata's ownership, combined with a series of exciting new
launches, helped
JLR increase its luxury market share from ~4.5% in 2008
to ~6.0% in 2015.
JLR margins, however, have been patchy, given the wide
difference in
margin profile between Jaguar, and Land Rover (LR)
products.
■ Product cycle once again shifting to higher-margin
LR products. JLR
witnessed a significant margin dilution over FY15-17, as
its product cycle
shifted to lower-margin Jaguar products and a part of its
highly profitable
China business turned into a JV. With product action lined
up on all the
higher-margin LR products (RR, RR Sport, Discovery, new
launch Velar), LR
will likely drive volume growth and margin expansion in
the next 12 months.
Moreover, these launches come on existing platforms and,
hence, should
help drive platform consolidation-related cost benefits. A
reduction in foreign
exchange drag should also support reported margins.
■ What can change? The domestic business needs a
big shake-up, in our
view. While the passenger vehicle (PV) business gets a lot
of negative
coverage, we believe the commercial vehicle (CV)
business has been a
bigger negative surprise, losing ~15% market share in the
past seven years.
The PV business, which incurs EBITDA losses, clearly
needs a partner to
share the burden of investments into new products and
help improve
utilisations. On the CV side, the company really needs to
be a lot more
proactive in addressing customer needs, instead of resting
on past laurels.
■ Strong EPS growth, reasonable valuations. We
value JLR at 4x FY19E
EV/EBITDA (Rs456), the domestic business at 8x FY19E
EV/EBITDA (Rs80),
its China JV at 10x FY19E P/E (Rs69), and others
adjusted for debt (Rs25) to
arrive at our TP of Rs630. We expect a strong FY17-19
earnings CAGR (from
a low base) of 70%+. The JLR business is trading at 3x
FY18E EV/EBITDA.
Tata Group: Global Impact and International Expansion

While Tata Group is deeply rooted in India, it has made

significant strides in expanding its presence internationally. The
group operates in over 100 countries, and many of its companies
are leaders in their respective fields globally. This section covers
how Tata has achieved such a remarkable level of international
recognition.

Key International Acquisitions

1. Jaguar Land Rover (JLR) One of the most high-profile

acquisitions by Tata Group occurred in 2008 when Tata
Motors acquired Jaguar Land Rover, a leading British
luxury car manufacturer. The acquisition of JLR marked a
bold move for Tata Motors, establishing its global
footprint in the luxury automobile segment. Under Tata’s
ownership, JLR has seen a revival in sales and has
introduced several new models, including the Range
Rover Evoque, Jaguar F-Type, and the Discovery
Sport.
2. Tetley Tea Tata Group also expanded its footprint in the
food and beverage sector through the acquisition of
Tetley, the second-largest tea brand in the world. Tata
Global Beverages, now known as Tata Consumer
Products, integrated Tetley into its portfolio, significantly
boosting the group’s presence in the global tea market.
Tetley has expanded to more than 40 countries, including
the UK, the US, Canada, and several European nations.
3. Corus Steel In 2007, Tata Steel acquired Corus, a major
steel manufacturer based in the UK and the Netherlands,
creating one of the world’s largest steel companies at the
time. The acquisition provided Tata Steel with a strong
European base, complementing its already large presence
in India. This move helped Tata Steel scale its production
capabilities and expand its global market share.
 4. Cyrus Mistry’s Leadership and Strategic Vision The
leadership under Cyrus Mistry (Chairman until 2016)
focused on strengthening Tata Group’s global outreach,
particularly in Europe, and fostering innovations in
manufacturing, technology, and services. Mistry also
pursued an aggressive strategy of acquisitions, diversifying
the group into new sectors, like aviation (through Tata
SIA Airlines, which operates under the brand Vistara in
partnership with Singapore Airlines).
5. Vistara and Air India Tata’s aviation ventures gained
major momentum in recent years with Vistara, a full-
service airline joint venture with Singapore Airlines.
Vistara has rapidly gained market share in India, especially
in the domestic premium segment. In addition, Tata Group
entered into the acquisition of Air India in 2022, with the
government privatizing the airline after a long struggle.
This acquisition further strengthens Tata’s hold in the
aviation industry, as it now controls both a premium full-
service and a low-cost airline through Air India and Air
India Express.

Geographical Expansion in Other Sectors

Tata Group has expanded not only in the automotive, steel, and
consumer goods sectors but also in technology, energy, and
hospitality:

 Tata Consultancy Services (TCS) operates in more than

45 countries, providing IT services to major clients in the
banking, financial services, insurance,
telecommunications, and retail sectors. Its major clients
include Fortune 500 companies, and its global presence
makes it a key player in the IT consulting and outsourcing
sectors.
 Tata Power has expanded beyond India, and it has a
significant presence in the African and Southeast Asian
markets, providing power generation and transmission
solutions.
  Tata Hotels operates an international portfolio of luxury
properties under the Taj brand, with properties in
countries like the United States, the United Kingdom,
Africa, and the Middle East. Taj Hotels has solidified its
presence globally, especially in emerging markets.

Leadership and Governance of Tata Group

The leadership and governance structure of Tata Group are key

to its long-term success, ensuring that the conglomerate remains
a global leader while upholding the values and principles laid
out by its founder, Jamsetji Tata. Over the years, the leadership
has played an essential role in shaping the Group's strategic
direction, fostering innovation, and maintaining the high
standards of corporate governance that are central to its identity.

8.1 Tata Group Leadership: Past and Present

Jamsetji Tata (Founder)

Jamsetji Tata is the visionary founder of the Tata Group. His

legacy of ethical business practices, corporate social
responsibility, and commitment to innovation has remained the
guiding principle for the Group. His most notable contributions
include the establishment of Tata Steel, India’s first steel plant,
and his efforts to create key institutions such as the Indian
Institute of Science (IISc) and the Tata Memorial Hospital.

Jamsetji Tata's values still resonate in the business culture of the

Group, with a strong emphasis on the welfare of employees,
trust-based leadership, and philanthropy. He famously said, "In
a free enterprise, the community is not just another stakeholder
in business, but is in fact the very purpose of its existence."
Ratan Tata (Chairman Emeritus, 1991–2012)

Ratan Tata is one of the most renowned names in Indian

business and served as the Chairman of Tata Group from 1991
to 2012. Under his leadership, Tata Group transformed into a
global powerhouse. Some of his major accomplishments
include:

 Global Expansion: Tata Group made significant strides

internationally, particularly through the high-profile
acquisitions of Jaguar Land Rover, Corus Steel, and
Tetley Tea. This expanded the Group’s global footprint
and gave it an international market presence.
 Innovation and Modernization: Tata Motors, under
Ratan Tata’s leadership, introduced the Tata Nano, the
world’s cheapest car, aimed at improving mobility for the
masses.
 Philanthropy: Ratan Tata has always advocated for
ethical business practices and corporate social
responsibility. His leadership was marked by initiatives
that balanced growth and social impact, especially through
the philanthropic work done by the Tata Trusts, which
control much of the Group.

Ratan Tata’s legacy is characterized by his commitment to

corporate social responsibility and to building an ethical,
responsible corporate empire that had a positive impact on
society.

Cyrus Mistry (Chairman, 2012–2016)

Cyrus Mistry, the son of construction magnate Pallonji Mistry,

took over as the Chairman of Tata Group in 2012, following
Ratan Tata’s retirement. His tenure was marked by efforts to
streamline the operations of Tata Group and restructure its
businesses. However, Mistry's tenure ended controversially in
2016, when he was ousted as the Chairman of Tata Group.
Despite his tenure being short-lived, Mistry made efforts to
emphasize cost-cutting, improving efficiency, and modernizing
Tata's business approach.

The controversial removal of Mistry led to a battle for control of

Tata Group, with the Tata Trusts (which control the Group’s
ownership) and other stakeholders rallying behind the idea of
returning leadership to Ratan Tata.

Natarajan Chandrasekaran (Chairman, 2017–Present)

Natarajan Chandrasekaran, or Chandra, became the Chairman

of Tata Group in February 2017, succeeding Cyrus Mistry.
Chandra has been with the Group for many years, having
previously served as the CEO and Managing Director of Tata
Consultancy Services (TCS), Tata Group’s largest and most
profitable company.

Under his leadership, Tata Group has made significant strides

toward modernization and digital transformation, focusing on
growth in areas like:

 Digital Transformation: Tata Group’s expansion into

cutting-edge technologies such as artificial intelligence,
blockchain, and the Internet of Things (IoT).
 Electric Vehicles: Tata Motors’ commitment to producing
electric vehicles, led by the successful launch of the
Nexon EV and Tigor EV, aligning with India’s push
toward sustainability.
 Strengthening Subsidiaries: Chandra’s leadership has
also focused on strengthening Tata Group’s subsidiaries,
particularly TCS, which remains a global leader in the IT
and consulting sectors.
 Building the Future of India: Tata Group's commitment
to sustainability has only grown under Chandra, with an
emphasis on creating a "Green Tata Group" through
renewable energy and eco-friendly initiatives.

Chandra’s leadership has focused on combining the legacy of

the Tata family with modern innovations to address the
challenges of the 21st century, with a particular focus on
ensuring the Group’s success in global markets while upholding
its values of social responsibility and ethical business practices.

8.2 Governance Structure and Corporate Responsibility

Tata Group is known for its ethical corporate governance, and

this is one of the key factors that distinguishes it from many
other global corporations. The governance structure has been
shaped by the Group’s commitment to its founder’s ideals of
integrity, fairness, and responsibility.

Ownership and Control Structure

Tata Group’s ownership is unique, as it is controlled by a

combination of family and charitable trusts. The Tata Trusts,
which are philanthropic organizations, own a significant portion
of the shares in Tata Group’s companies. The Sir Dorabji Tata
Trust and the Jamsetji Tata Trust hold substantial shares in
major Tata companies, such as Tata Consultancy Services
(TCS), Tata Motors, and Tata Steel.

 Tata Trusts: The Tata Trusts control around 66% of the

voting rights in Tata Sons, the holding company of the
Tata Group. This structure ensures that Tata Group
remains committed to philanthropic purposes and social
causes.
 Tata Sons: Tata Sons is the primary holding company and
is responsible for overseeing the strategic direction of the
Group. It is governed by the Board of Directors, with the
Chairman serving as the head.

Board of Directors

Tata Group’s corporate governance is reinforced by a strong and

diversified board structure. The board of directors of Tata
Group’s key companies typically includes representatives from
different fields, including finance, law, technology, and business
leadership. The composition of the board ensures that decisions
are made with a broad and diverse perspective, balancing the
interests of the various stakeholders involved.

The board of Tata Group is known for being independent and

transparent. There is a continuous focus on ensuring ethical
practices, fair play, and responsible decision-making. The Tata
Group is also one of the few Indian business conglomerates that
consistently receives high marks for corporate governance, with
a clear focus on environmental, social, and governance (ESG)
practices.

Ethical Business Practices and Transparency

Tata Group has long been associated with a culture of ethics and
transparency in its dealings. The Group adheres to strict
standards of corporate governance, and it is committed to:

 Financial Transparency: All Tata Group companies

adhere to rigorous financial reporting and auditing
standards. The Group is committed to providing accurate,
clear, and transparent financial information to all
stakeholders.
 Fair Trade Practices: Tata Group has implemented fair
trade policies across its subsidiaries. This includes ethical
sourcing of materials, treating suppliers and contractors
fairly, and ensuring that no unethical practices like child
labor or unfair wages are tolerated.
 Social Responsibility: Tata’s commitment to corporate
social responsibility (CSR) is one of its defining features.
The Tata Trusts donate a significant portion of their
earnings to various causes, including education,
healthcare, poverty alleviation, and environmental
sustainability. Tata Group’s businesses are expected to be
involved in charitable and social initiatives, ensuring that
they contribute positively to society.
The Role of Tata Trusts in Governance

The Tata Trusts hold significant sway in governance decisions.

The Trustees are key players in decision-making, and their role
goes beyond overseeing the Group’s philanthropic activities.
The Tata Trusts have a direct influence on the strategic direction
of Tata Group, including appointing key leadership roles within
the Group. The Trusts have consistently used their power to
ensure that the Group remains focused on its social
commitments, including a focus on rural development, health,
and education.

8.3 Leadership Philosophy: Ethical Leadership

Tata Group's leadership philosophy revolves around ethical and

responsible leadership. It embraces several key principles that
are at the core of the Group's operations:

 Integrity: Tata Group believes in conducting business

with the highest standards of integrity. Leaders are
expected to uphold the values of honesty, fairness, and
transparency in all dealings.
 Visionary Leadership: Leaders are expected to guide
their teams and subsidiaries with a visionary approach,
anticipating changes in the market and society and steering
the Group in the right direction.
 Employee-Centric Culture: Tata Group prioritizes the
well-being of its employees, encouraging a culture of
inclusion, innovation, and empowerment.
 Customer-Centric Approach: Leaders in the Tata Group
are focused on delivering value to customers, ensuring that
products and services meet the highest standards.

8.4 Leadership Development Programs

Tata Group places a significant emphasis on leadership
development, ensuring that it nurtures future leaders within its
ranks. Some key initiatives include:

 Tata Management Training Centre (TMTC): This is the

premier institute for leadership training, focusing on
nurturing future leaders with skills in business
management, strategic thinking, and ethics. It is located in
Pune, India.
 Tata Leadership Development Program (TLDP): The
TLDP is a structured initiative designed to identify and
train emerging leaders from within the Group, helping
them to take on leadership roles at various subsidiaries.
 Global Talent Programs: The Group also invests in
attracting and developing global talent, ensuring that Tata
Group’s leadership is well-equipped to deal with global
challenges in the 21st century.
Financial Performance of Tata Group

Tata Group is one of the largest and most diversified conglomerates in the world, and
its financial performance reflects its robust presence across numerous sectors. The
Group’s financial performance is driven by its core businesses, including Tata
Consultancy Services (TCS), Tata Steel, Tata Motors, Tata Power, and several
other subsidiaries in industries such as chemicals, telecommunications, and consumer
products.

In this section, we will break down Tata Group’s financial performance by examining
key metrics, growth trends, and the performance of its major subsidiaries.
Additionally, we will discuss Tata Group’s profitability, revenue growth, and its
strategic financial moves over the years.

9.1 Key Financial Metrics and Group Consolidation

Tata Group’s financial strength comes from its diversified portfolio, with each
company contributing to the Group’s overall performance. The financial performance
of Tata Group can be summarized by the following key metrics:

Revenue and Profit Growth

 Revenue: Tata Group’s total consolidated revenue exceeds $100 billion

annually. The Group’s revenue streams come from a variety of industries,
ranging from IT services and automotive to steel, power, and chemicals.

For example:

o TCS contributes a significant portion of the revenue, with over $25 billion in
annual revenue.
o Tata Motors generates substantial revenue from the sales of passenger
vehicles, commercial vehicles, and its electric vehicle segment.
o Tata Steel also contributes significantly, with revenues approaching $20
billion annually, driven by its operations in Europe, India, and other markets.

Operating Profit and EBITDA

Operating profit and EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) are critical indicators of operational efficiency for Tata Group. Many of
the Group’s companies have demonstrated strong EBITDA margins, driven by
improved operational efficiency and cost-cutting initiatives. Companies like TCS,
Tata Steel, and Tata Motors are known for maintaining healthy margins, while
companies in capital-intensive industries like Tata Power and Tata Chemicals also
perform well, thanks to strategic investments in infrastructure and technology.

 TCS has an EBITDA margin of around 30%, reflecting its high-margin, scalable
business model in the IT and consulting space.
  Tata Steel operates in a low-margin industry (steel), but its ability to innovate and
diversify product offerings has kept its EBITDA healthy.

Net Profit

Tata Group’s net profit has consistently grown, driven by the strong performances of
key subsidiaries such as TCS, Tata Steel, and Tata Motors. In recent years, the Group
has also benefited from its strategic focus on high-growth sectors like electric vehicles
and renewable energy.

In FY2023, Tata Group companies collectively reported strong earnings:

 Tata Consultancy Services (TCS), the crown jewel of the Group, has seen
steady profit growth, achieving net profits exceeding $5 billion annually. As
one of the world’s leading IT services companies, TCS contributes to the
Group’s bottom line with its diverse client base across sectors such as
banking, finance, retail, and manufacturing.
 Tata Steel has benefitted from the global demand for steel, particularly in
industries like construction and automotive, yielding healthy profit growth
despite challenges related to input costs and price fluctuations in steel markets.
 Tata Motors, with its automotive segment, has seen fluctuations in
profitability, owing to changes in global automotive demand, and the
investment required in new technologies, particularly electric vehicles (EVs).
However, the performance of the Tata Nexon EV and Tata Tigor EV has
provided a strong positive outlook for future earnings.

9.2 Financial Performance of Major Tata Group Subsidiaries

Let’s look more closely at the financial performance of the key subsidiaries that drive
the Group’s financial growth:

1. Tata Consultancy Services (TCS)

TCS is not only Tata Group’s most profitable company but also one of the largest IT
services firms globally. It has been a consistent performer in terms of both revenue
and profit.

 Revenue (FY2023): $26 billion

 Net Profit (FY2023): $5.4 billion
 EBITDA Margin: 30% (One of the highest in the industry)

TCS continues to dominate the global IT outsourcing market, benefiting from long-
term client relationships, digital transformation services, and strong demand for
cloud-based solutions and enterprise applications.

Key growth drivers for TCS include:

 Increasing demand for cloud computing and digital services.

  Expansion of artificial intelligence (AI), data analytics, and IoT services.
 Strong client retention rates and long-term contracts, particularly in the financial
services, manufacturing, and retail sectors.

2. Tata Motors

Tata Motors is a major player in the automotive sector in India and globally. It is
known for manufacturing cars, trucks, buses, and defense vehicles, and has made a
successful entry into the electric vehicle (EV) market.

 Revenue (FY2023): $43 billion (approx.)

 Net Profit (FY2023): $1.1 billion

Tata Motors has shown positive growth in its electric vehicle segment, especially with
the Nexon EV, which has gained significant popularity in India. However, Tata
Motors also faces challenges in the global automotive market, including increased
competition from both traditional automakers and new entrants focused on electric
vehicles.

The company’s financials are also impacted by:

 Global supply chain disruptions and chip shortages.

 Rising raw material costs for vehicle production.
 Investment in new vehicle technology, especially in electric mobility.

3. Tata Steel

Tata Steel is one of the largest steel manufacturers in the world, and its operations
span several countries, including India, the UK, and the Netherlands.

 Revenue (FY2023): $25 billion (approx.)

 Net Profit (FY2023): $2.4 billion

Tata Steel has benefitted from the global rise in steel demand, particularly in the
automotive and construction industries. The company continues to pursue sustainable
practices, including investing in green steel technologies, and its financial
performance reflects this shift.

Key drivers of Tata Steel’s performance:

 Strong growth in demand for steel in emerging markets.

 Cost reduction initiatives and strategic efficiency improvements.
 High-margin products, including advanced steel alloys and high-strength steel used
in automotive and construction.

4. Tata Power

Tata Power is a leading player in India’s energy sector, particularly in renewable

energy. The company is shifting its focus toward solar, wind, and other clean energy
sources.
  Revenue (FY2023): $12 billion
 Net Profit (FY2023): $800 million

Tata Power’s performance has been positively impacted by India’s push toward
sustainable energy. The company’s investments in solar energy, wind power, and
electric vehicle charging infrastructure position it for future growth. Furthermore,
its commitment to reducing carbon emissions aligns with the growing demand for
green energy globally.

Key performance highlights:

 Growth in renewable energy portfolio and increased capacity.

 Expansion into electric vehicle (EV) charging stations across India.
 Strong strategic initiatives in the electricity distribution sector.

5. Tata Consumer Products (Tata Consumer)

Tata Consumer Products is a leading player in the FMCG sector, with a portfolio that
includes food, beverages, and consumer products.

 Revenue (FY2023): $2.2 billion (approx.)

 Net Profit (FY2023): $220 million

Tata Consumer Products includes brands such as Tata Tea, Tata Salt, and Tata
Coffee, and the company has made significant inroads into the international markets,
particularly through the Tetley Tea acquisition. The company's financial performance
has been strong, supported by its expanding product offerings in the food and
beverage categories.

Key factors contributing to its performance:

 Strong growth in global tea markets, especially Tetley.

 Expansion into health and wellness products, with offerings such as Tata Sampann
and Tata Gluco+.
 High demand for packaged foods and beverages.

9.3 Profitability, Cash Flow, and Debt Management

Profitability

Tata Group’s profitability remains strong, with many of its subsidiaries posting
consistent growth in earnings. However, companies like Tata Motors and Tata Steel,
which operate in more cyclical industries, experience volatility in profits due to
changes in global demand and commodity prices.

 High-profit margin businesses like TCS and Tata Consultancy Services drive much of
the Group’s overall profitability.
  Tata Steel and Tata Motors generate steady profits, though impacted by cyclical
factors such as steel prices and automotive demand.

Cash Flow

Cash flow generation is strong across most Tata Group companies, particularly TCS,
which has healthy operating cash flows driven by long-term contracts and repeat
clients. Tata Motors and Tata Steel have also consistently generated positive cash
flow, although investments in technology and expansion projects occasionally impact
short-term liquidity.

Debt Management

Tata Group’s debt management is robust, with most of its subsidiaries having a clear
strategy for managing debt while maintaining financial flexibility. However, certain
subsidiaries in capital-intensive industries like Tata Motors and Tata Steel maintain
relatively high levels of debt. The Group, however, takes a prudent approach to
leveraging debt and ensures that any borrowings are aligned with its long-term growth
objectives.
Conclusion

Tata Group’s financial performance showcases the

conglomerate’s resilience, its ability to innovate, and its
leadership in multiple industries. With strong
profitability in high-margin sectors like IT and consumer
goods, along with strategic investments in emerging
sectors like renewable energy and electric vehicles, Tata
Group is positioned for sustainable growth.
While some subsidiaries like Tata Motors and Tata Steel
may face cyclical challenges, the Group’s diversified
portfolio and strategic investments ensure that it
continues to thrive. Tata Group’s focus on long-term
value creation, backed by its commitment to
sustainability, corporate social responsibility, and ethical
governance, makes it a standout player in the global
business arena.