INDIA'S PREMIER CORPORATE GIANTS HAVE RECENTLY BEEN IN THE NEWS FOR ALL THE RIGHT REASONS. THEY HAVE INITIATED THE EXECUTION OF A LOFTY PLAN TO DOMINATE THE FUTURE. HERE'S HOW.
Tata. The name oozes trust. For decades, the company has entrenched itself into the hearts & minds of millions of Indian consumers. The salt to software conglomerate has faced many upheaval and challenges. But it has stood the test of time and vanquished its demons (read changing business environment) with aplomb.
And now the company is set to embark upon a glorious digital crusade under the tutelage of its new leader, N Chandrasekaran, the man responsible for the dizzying success of the Tata Group's flagship entity, TCS. Mr. Chandrasekaran wants to transform the group into a digital-first agile company, who has the vision & the means to be a market leader in many sectors. Let's take a structured look at how the company plans to do so.
CONSTRUCTING A SUPER APP
A Super App is a relatively modern phenomenon championed in the Chinese market by Tencent's WeChat. To put it briefly, a Super App aims to be a one-stop destination for fulfiling every conceivable need of a consumer. The advantage of a Super App (from a business point of view) is that
It allows greater monetization of a consumer. Example: A person hailing a cab through a SuperApp can be nudged to download the inhouse payment option & dine in an affiliated diner near the destination.
It enables a diversified entity to combine its offerings & draw synergies. Example: A company like ITC can offer hotel bookings, a subscription box of stationary & its FMCG products all in one app.
It leverages consumer data to offer a more customized experience. Example: A person buying fitness gear can be showed the subscription to a wellness app (like curefit)
It retains consumers & also improves monthly visits by a single user thereby increasing chances of greater spending. Example: An app offering both deliveries of goods (like dunzo) & payment options (like PayTM) can have a very high open-rate.
You get the picture. Better synergies. Better offerings. Better monetization. The Tata Group also wants to be on the Super App bandwagon. A cursory look at its recent M&A spree will confirm this notion.
The big-ticket acquisition is undoubtedly that of big basket. Big Basket has a leading market share of 37% in the online grocery battle in 2021, as per the economic times. This is a very lucrative pie indeed as consumer trends pivot towards ease & convenience while home shopping. A Tata Group lead consortium has also bid (expected to receive the license) for starting a payment app on NUE, a UPI like interface. Its acquisition of curefit will be aimed at attracting the health-conscious. Apart from these acquisitions, Tata's massive existing house of brands will further supplement this effort. Tata Sky is a great entertainment option. Croma & Cliq are two omnichannel options to push consumerdurables. Tanishq & Titan are trusted brands in the jewellery & watch market respectively. Apart from this, it is also ramping up talks to acquire Dunzo, a big name in the delivery space in India. Imagine the complete experience such a diverse app can provide to its users!
Some areas the company can still work upon:
Better integration & highlighting of fashion branded stores like Westside & Zudio. Fashion can be a key growth area for attracting new users.
Properly utilize its financial muscle by opting for insurance (Tata AIG) & mutual funds (Tata MF) instead of just being a small payments player. The payment market has saturated in India & has many established players like GPay, PayTM & PhonPe. Creating a complete financial concoction can leverage brand Tata.
Acquiring a travel aggregator ixixgo can truly augment the app & negate the need for a cab aggregator (which has been the main source of traffic for Tencent's WeChat after payments).
POWERING THE FUTURE
India's quest to be a renewable powerhouse is no secret. Initiatives like International Solar Alliance (ISA), FAME-II & KUSUM are some of the government's initiatives in fulfilling this goal. Banking on positive bureaucratic push, the group's Tata Power is poised to power the future.
The group is one of the leading players in both solar & wind energy, a rare combo.
It is targeting both commercial solar fields as well as domestic rooftops, another industry first.
Apart from its dabbling in the renewables space, Tata Power is also rapidly expanding its EV charging network, sensing the incoming avalanche of two-wheeler EVs in India.
It plans to set up 700 charging stations across India by the end of 2021 (500 already set up & functional) & has also tied up with Hindustan Petroleum , a leading chain of petrol pumps in India.
A look at one of the many charging stations of Tata Power
If TP does establish dominance in even of these two industries, the conglomerate can be assured of a rich cash cow generating constant revenue at regular intervals.
GOING ELECTRIC
Apart from investing in charging infra, the company also is a huge believer in electric mobility. Tata Motors, a flagship endeavour of the group is aggressively pursuing electric cars.
Tata Nexon, India's first Modern Electric Car
The Jaguar & Land Rover acquisition has helped Tata Motors to renew its design & technological capabilities.
Tata Motors has the first-mover advantage in India's EV space. However, it has a lead in a very minuscule market which has not even hit a million unit sales so far.
It can utilize its Tata Power EV network & provide special privileges to owners of Tata EVs. This can create a differential factor in the long run.
Another big trump card for the Tata Group is Tata Elxsi. This disruptive company helps automakers around the globe in integrating new technologies like IoT, voice assistants & vehicle infotainment systems in the auto world. Better synergies between Motors & Elxsi can really make their cars futuristic & tech-savvy, a real edge in the market when we consider the demographics of new buyers.
This industry will soon turn ultra-competitive with the influx of a number of players like Mahindra & Hyundai entering the target segment. I personally believe that electric scooters will face mass adoption first on a huge scale & then slowly cars will go mainstream. Nonetheless, cars can be a lucrative market soon as well.
THE FMCG STORY
The FMCG industry in India is a very competitive & price-sensitive space. Legacy players like HUL, P&G & Dabur have been challenged rather successfully by newer entrants like Marico & Bajaj. The Tata Group has traditionally been a big player in the tea & coffee segment of the food & beverages segment as well as a dominant salt seller. Tata Consumer Products Limited, the company in charge of the FMCG push has recently taken strides in being competitive.
The biggest advantage that Tata has is the brand equity of trust it has built over the years which is of paramount importance in this industry. people have no second thoughts while purchasing Tata products.
Another key asset will be big basket. The app can truly unlock value if Tata products are nudged gently to its monthly active user base of 6 million + people. The company can learn from Amazon that has mastered this strategy of private label marketing.
The company honestly needs more products to be a real FMCG giant. It has taken baby steps in this regard by acquiring independent brand Soul Foods (organic & natural food products), Kottaram Foods (healthy breakfast) & Pepsico's stake in Nourishco (bottler of Himalaya Mineral Water). Still, the product mix seems incomplete to say the least.
THE SCANT COMMODITY
There is one vital component whose scarcity has wreaked havoc around the world. Its meagre supply has lead to the loss of billions of dollars. We simply can't function without this ubiquitous modern marvel! It can be found everywhere in smartphones, cars, computers & TVs!
Any guesses?
That rare little something is called a semiconductor.
N Chandrasekaran recently announced the group's foray into the manufacturing of semiconductors. However, I have to say they are venturing into troubled waters here. China, despite its billions of R&D spending, laser-focused government policy & huge bureaucratic push, failed to create a domestic champion competent enough the rival the likes of TSMC, Samsung, Intel & AMD.
However, the Chinese envisioned a complete end to end semiconductor company that does everything from chip design, fabrication, manufacturing & assembling. Tata, on the other hand, is only focusing on one component of the value chain. Nonetheless, it is still a very capital intensive business.
On the flip side, if this turns out as planned, it can be a game-changer for not only the Tata Group but also for India's tech ecosystem as a whole. Having a domestic semiconductor manufacturer is a signal towards a sophisticated tech space, bringing in ore more FII & VC money.
THE WHOLE PICTURE
The Tata Group is so colossal that I could not cover certain sectors in great detail but will present a brief hypothesis below:
5G: The group's failed Docomo venture left a scar on the minds of many. However, this time around the company is focusing on building alliances with a clutch of Indian start-ups including Pune-based Saankhya Labs to offer 5G network solutions using the open radio access network. According to industry sources, Tata group has plans to take its 5G solutions to the global market after the trials with Airtel are completed. While Tata Consultancy Services will bring the software stack required for the solution, Tatas will rely on Indian start-ups to plug in other components that go into making a 5G network. This is big news as India can build 5G infrastructure for the world!
Airlines: There are rumours of the Tatas being the only bidder of Air India. They already are the owner of Air Asia & Vistara. It remains to be seen why the Tatas are interested in venturing deeper known for razor-thin margins & high fixed costs, especially one susceptible to the pandemic.
Defense: Tata Aerospace & Defense is a major player in India's Self Reliant Mission in the Defense Sector. It makes aerospace components, basic weapons, body armours & battlefield vehicles. Favourable government policy is a major booster for this company.
THE FUTURE
The Company has made big bets in many emerging sectors & has looked to bolster its position in existing ones. Digital disruption seems to be the common theme in almost all its plans which shows how adaptable & forward-looking the management of this company is. It all depends on the execution now. heralding fancy plans is one thing. Executing them is another. How efficient & quick mover they are will determine their rate of success. Whether India's current behemoth can be a global titan of tomorrow or not will be known soon enough.
WHAT CAN YOU LEARN
On analyzing the way the Tata Group goes about its business, I could learn the following. You can use this as an investor, entrepreneur or simply a student looking for actionable insights:
Look out for industries of the future. Most of the new verticals of this group are aimed towards "sunrise" sectors which are bound to grow exponentially in the near future. Join the bandwagon early & reap the rewards. As a businessman, start business in such sectors. As an investor, look out for stocks which follow this business strategy. As a student, learn skills which can allow you to carve out a career in any of the sunrise sectors as initially, only a few will possess the relevant skills.
Try to form smart alliances. The Tata Group is a master of strategic alliance. Some examples are: Starbucks & Tata Consumer, Airtel & TCS + Tata Communications and Zara & Trent. I refer to Joint venture & not acquisitions here. Whoever you are, connect & nurture relationships with people who can take out to the next level! Be it your gym workout buddy or your erudite classmate.
Give back to the society. Two-thirds or 66% of all businesses of the group is tied up in philanthropic activity. It means that atleast 66% of the dividend announced by any of the group's company will go to charity! Due to such efforts, Indian consumers trust the brand & don't think twice before buying such products.
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