Top group executives said Tata group companies have begun to actively cut into international markets by exiting subscale businesses to reinvest capital and intensify their local focus.
Companies have been mandated to maintain businesses that are profitable and not deviate from their main consumption market, India, with strict capital allocation on scalable profitable businesses. Officials said any strategic expansion plans outside India will be made selectively and only if they meet scalability or profitability criteria.
Bankers and money managers said the resumption of domestic trading activity coupled with a rally in global commodity markets has helped the group's effort to focus on profits.
In recent months, companies including Tata Consumers Tata Power and Tata Chori have been merging or selling their small businesses outside India, or seeking buyers for them. The group CEO told ET that the focus is on building scalable businesses while sensing the pulse of the Indian consumer and tracking shareholder returns.
"Any fresh capital will be primarily invested in India. This clearly has a strategic intent," said a highly placed group official. Tata Sons, the group's holding company, did not comment.
Tata Consumer exited two US-based joint ventures last year and sold its stake to joint partner Harris Tea Company LLC. The company sold its MAP out-of-home coffee business in Australia to Buchery Group Pty Ltd., a boutique coffee maker founded in Australia in 2007, which was led by Santo Bucheri and his family.
A top Tata Consumer executive said, “We are focused on monetizing India's opportunities. Any business that operates profitably outside India without straining the balance sheet or distracting us from our core businesses and takes advantage of the same infrastructure."
Analysts say the strategy has helped revive the group's shares Tata Steel said it has given "substantial financial support" to its UK business, which employs around 15,000 people, and reduced its assets by more than £2 billion ($2.9 billion). Currently, Tata Steel is making both the units self-reliant so that they do not depend on India for financial support.
An official close to Tata Steel said, "There have been discussions in the past to find buyers for the European business, but for now, the company is focusing on expanding the business in India." The company is also planning to sell its Thailand business as it seeks to exit low-profit overseas units in the existing supercycle after first selling its Singapore unit, NatSteel Holdings.
Market participants said a spurt in metal prices in the past one year has helped Tata Steel cut debt and sell off unprofitable businesses faster.
Tata Power is looking to sell its stake in joint ventures in South Africa and Zambia to reduce its financial liabilities and focus on the domestic market. It is looking for buyers to sell its 50% stake in wind power company Cenergi in South Africa and Itezhi Teji Power Corporation (ITPC) in Zambia.
A top Tata Power executive said, "The decision to monetize this South African asset is in line with our stated strategy of de-linking the balance sheet by divesting international assets of sub-optimal size." “Proceeds from such sales will be reinvested in emerging sectors where there is a huge growth opportunity. The company will focus on renewable energy, power distribution and service-based businesses in India that will bring more value and align us with India's emerging consumer needs."
The company's asset-sale plans are expected to raise Rs 2,000-2,500 crore, which will be used to reduce debt and fund development plans in India. Indian Hotels Company Limited will be open to growth opportunities globally after mapping the Indian market to expand its top brands.
Source by internet.
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