Tata Sons rejigs businesses into ten verticals

Tata Group holding company Tata Sons has restructured the $104-billion conglomerate into 10 verticals such as consumer, trading and investments. The holding company’s representatives will head the verticals and ensure coordination and smooth functioning of the businesses in each of them, said two people with knowledge of the plan.

The creation of verticals under Tata Sons chairman N Chandrasekaran will help about 100 companies synergise operations and cut costs. For instance, Tata Motors recently announced a £3.1-billion impairment charge on account of its Jaguar Land Rover unit. Chandrasekaran had earlier called the move a process of simplifying, synergising and scaling (3S) to create an agile, powerful platform that will aid rapid growth.

The hardest part of the exercise was said to be putting together the consumer and retail vertical, given the disparate, listed units such as Tata Chemicals, Tata Global Beverages, Titan, Voltas, Croma and Westside.

‘WORK IN PROGRESS’
The group has clubbed its hotels and aviation businesses — Indian Hotels and joint ventures Vistara and AirAsia — under the travel and tourism vertical.

The vertical head, who will play the role of a coordinator and facilitator for the various companies in each stack, need not necessarily be a Tata Sons board member, said a top executive. “But the person will be someone with deep sector knowledge and the capability to ensure benefits of scale,” he said.

Fund managers said the recast will boost efficiency.

“Verticalisation would bring in efficiencies, helping similar businesses cash in on the collective wisdom and synergies of a vertical,” said A Balasubramanian, CEO of Birla Sun Life Asset Management. “So clearly, there will be operating efficiencies coming in... But the consolidation and focus on scale should also ensure that it does not affect the operational freedom of individual companies.”

The restructuring is a “work in progress” said a senior Tata Group executive. “These are not issues that can be solved quickly, some may take a few more months or a year or so more. But what we have is a clear sense of direction.”

Tata Communications, Tata Sky and Tata Teleservices have been clubbed under the telecom and media vertical. Tata International, Tata Industries and Tata Investment Corporation have been grouped into trading and investments.

“Some clusters are focused on simplification, while others are building on scale. Tata Sons had spent over Rs 70,000 crore ($10 billion) in 2018 to deleverage and restructure Tata companies, consolidate crossholdings, acquire strategic assets and infuse muchneeded capital,” said another Tata Group executive. “The new structure will help it better manage core businesses and exit noncore smaller companies.”

The group has around 100 operating companies, of which some 30 are listed, with over 1,000 subsidiaries. Tata Sons chairman Chandrasekaran wants to scale up businesses to compete aggressively in the marketplace. The move is critical for the Tata Group to improve efficiencies and increase profits.

“It is an extremely heterogeneous and complex brand from services to steel and a diverse consumer base, so consolidation and efficiencies of scale are clearly beneficial while optimizing marketing spends and leveraging the scale of its supply chain and logistics,” said Raghu Vishwanath, MD, Vertebrand. “But it is also important to bring a unified working culture aligned to a common goal.”

Source:-https://retail.economictimes.indiatimes.com/news/industry/tata-sons-rejigs-businesses-into-ten-verticals/68249248