On Friday, Tata Steel said it is merging seven smaller metal units with itself in a bid to reduce costs, simplify corporate structure and strengthen its balance sheet. Four are publicly listed.
The 154-year-old Tata Group, which makes everything from salt to software and owns British luxury-car maker Jaguar Land Rover, has been trying to slim down since Tata Sons Chairman Natarajan Chandrasekaran took the helm after a bitter boardroom battle in 2017. Tata Steel’s announcement Friday reflects Mr. Chandrasekaran’s ambition for a more agile, slimmer, and financially fitter conglomerate as it prepares to focus on new areas, including digital enterprises and a bigger foray into aviation following its acquisition of Air India.
Tata Group is in many ways symbolic of India’s own evolution. It has formidable resources, human and otherwise, and could be well-placed to capitalize on the West’s growing disillusionment with China and India’s own rising economic heft—but struggles with a bureaucratic culture and a cornucopia of individual, entrenched fiefdoms.
Too many subsidiaries mean excessive clerical and administrative work and forgoing some economies of scale. The entire group of listed and unlisted companies collectively employ over 935,000 people. The 29 listed companies clock in at a market capitalization of $311 billion. But over the past decade, only Tata Consultancy Services, Tata Chemicals, Tata Consumer Products and Titan have outperformed the BSE Sensex among major Tata companies. Tata Steel, Tata Motors and Tata Power have underperformed, according to FactSet.
Moreover, Tata Group has been reorganizing itself for a while now already. In 2019, Tata Chemicals hived off its consumer business, which was merged with Tata Global Beverages. Since then the stock of the new company now known as Tata Consumer Products is up 233%. Tata Group recently received regulatory approval for the merger of AirAsia India with Air India, two of its aviation brands.
Tata Group has been at “the top of the corporate pyramid" in India for the better part of a century, according to Mircea Raianu, a historian at the University of Maryland. In his year-end communication to Tata employees, Mr. Chandrasekaran said the group can play a part in the evolution of India.
But that will depend on how fast Tata loses the extra weight. So far, the process has been rather stately.
