Tata companies cut exposure to global markets

Tata Group companies have begun actively cutting exposure to international markets by exiting subscale businesses to reinvest capital and intensify their local focus, said top executives of the conglomerate. The companies have been mandated to retain businesses that are profitable and not a distraction to their main consumption market, India, with stricter capital allocation on scalable profitable businesses. Any strategic expansion plans outside India will be selective and made only if they meet the scalability or profitability criteria, officials said.

Bankers and money managers said a bull run in global commodity markets coupled with the restart of domestic business activity have aided the group's endeavour to focus on profitability.

In recent months, companies including Tata Consumer, Tata Power and Tata Steel among others have been merging or selling their smaller businesses outside India, or else are seeking buyers for them. Group CEOs told ET the focus is on sensing the pulse of the Indian consumer, and building scalable businesses with an eye on shareholder returns.


"Any new capital will primarily be invested in India. That is clearly the 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, selling its stake to joint partner Harris Tea Company LLC. The company also divested its MAP Out-of-Home coffee business in Australia to Buccheri Group Pty Ltd, a boutique coffee manufacturer established in Australia in 2007 and led by Santo Buccheri and his family.

"We are focused on monetising the India opportunity. Any businesses that operate profitably outside India without being a drag on the balance sheet or distracting us from our core businesses and leverages the same infrastructure will continue," said a top Tata Consumer executive.

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Tata Steel stated it had extended "substantial financial support" to its UK business, which employs about 15,000 people, and written its assets down by more than 2 billion pounds ($2.9 billion). Currently, Tata Steel is making both the units self-sufficient so that they will not be dependent on India for financial support.

"There have been discussions earlier on scouting for buyers for the European businesses, but as of now the company is focussed on growing in India," said an official close to Tata Steel. The company also plans to sell its Thailand business as it looks to exit less profitable overseas units in the ongoing supercycle after earlier offloading its Singapore unit, NatSteel Holdings.

Market participants said the rally in metal prices in the past year or so has helped Tata Steel cut debt and sell unprofitable businesses faster.

Tata Power is looking to sell its stakes in joint ventures in South Africa and Zambia in order to cut its financial liabilities and focus on the domestic market. It's looking for buyers to divest its 50% stake each in wind energy company Cennergi in South Africa and Itezhi Tezhi Power Corp. (ITPC) in Zambia.

"The decision to monetise this South African asset is in alignment with our stated strategy to deleverage the balance sheet by divesting sub-optimal size international assets," said a top Tata Power official. "The proceeds from such sales would be re-invested in emerging areas where there is a huge growth opportunity. The company will focus on renewable power, power distribution and service-led businesses in India which will bring in greater value and help us align with the emerging consumer needs in India."

The company's asset-sale plans are expected to raise Rs 2,000-2,500 crore, which will be used to pare debt and fund growth plans in India. Indian Hotels Co. Ltd will be open to opportunities for growth globally once it has mapped out the Indian market for expanding its top brands.