The Tata Group, India's largest private sector conglomerate, plans to prune the number of its listed companies, either through mergers or disinvestments, a top executive familiar with the matter said. The group has 30 companies listed on the stock exchanges, which collectively give it a market capitalisation of over $160 billion. The plan is to have limited set of companies on the bourses, the source said.
The proposed move will simplify the group’s corporate structure and help its management increase focus on key entities while exiting small and non-core businesses, the executive explained. The group’s thinking is that some listed companies are small in terms of market capitalisation, revenue and profit, and these could be folded into the main firms. “And if the main company is not interested in acquiring them, then these could be sold to external parties,” the executive added.
For instance, in the hospitality sector, the group has three listed companies - Indian Hotels, Benares Hotels and Oriental Hotels. Likewise, in the materials segment, it has six listed entities - Tata Steel, Tata Sponge Iron, Tata Metaliks, TRF, Tayo Rolls (which in the process of being shut down) and the recently acquired Bhushan Steel.
It is relatively easier to opt for a merger when the smaller companies are subsidiaries of the parent or are into similar or adjacent lines of businesses of the parent. For example, the merger of CMC with TCS helped the conglomerate consolidate its IT services business. There has been speculation that Tata Elxsi too will be combined with TCS. Additionally, some of the listed companies came into the Tata Group’s fold through acquisitions - Tata Coffee and Tata Communications.
It is unclear how the mergers will play out among the group’s listed consumer products, agri and retail businesses. It has been long speculated that Tata Coffee will be amalgamated with Tata Global, while Rallis will be combined with Tata Chemicals. However, with the current plans of consolidating the packaged foods business under a single entity, the lentils, salts and spices business housed under Tata Chemicals could be brought under Tata Global along with Tata Coffee.
In the retail business, with two listed firms - Trent and Titan, the consolidation efforts will take time as there are strategic partners and financial investors holding stakes, the person said. In Titan, the Tamil Nadu government is a joint venture partner holding nearly 28% stake.