Tatas hot on joint ventures in sectors opened up for foreign capital

MUMBAI:Among India’s leading conglomerates, the Tata Group has shown remarkable alacrity in entering new sectors that have been opened up for foreign investment in the recent past through the joint venture route. On Tuesday, the Tata Group and UK-based retailer Tesco announced a 50:50 joint venture for a multi-brand retail joint venture.

“They have taken the JV route to get into new areas. This is because they don’t understand certain businesses, but have the internal capability to scale it up to a global size,” said professor Kavil Ramachandran, Thomas Schmidheiny chair of family business and wealth management at Indian School of Business.

Tatas’ Trent is expected to file an application with the foreign investment promotion board (FIPB) for a 50:50 multi-brand retail joint venture on Wednesday. The plans envisage Tesco picking up a 50% stake in Tatas’ existing Trent Hypermarkets, which runs 16 hypermarkets under Star Bazaar brand. Tata Global Beverages has a 50:50 joint venture with Starbucks, which has embarked on an aggressive roll-out.


So far, the Tata Group is the lone business house to take advantage of the government allowing foreign participation in multibrand retail. The move to enlist its old partner Tesco comes at a time when other prospective entrants such as Walmart are scaling down their activities, and others such as Reliance Industries and Aditya Birla Group have evinced no interest in a joint venture with a foreign retailer.

There is a method behind the moves made by the Tatas. “These are areas they wanted to explore for long. These are not spur-of-themoment decisions, they wanted policy clarity before they walked in,” professor Ramachandran said. When the government decided to allow foreign airlines to set up joint ventures with existing domestic airlines, the Tata Group tied up with not one, but two airlines — Tony Fernandes’ budget airline AirAsia and later surprising everyone by announcing another tie-up with Singapore Airlines.

People watching the Tata Group say the big moves in the airline and retail segment as indicating continuity in the sense that it reflects former chairman Ratan Tata’s vision for the group. “He (Tata) is playing a positive role. The aviation business has been a dream project and the involvement is apparent,” the person said.

“It’s a reflection of their interest in the retail and aviation sectors,” the person added.

A leading investor who runs a listed brokerage firm said he sees Cyrus Mistry, chairman of Tata Group taking his time to putting his stamp in the group. “You can see he’s conservative. He builds block by block. He hails from a family that’s steeped in the construction business. He will build and rebuild gradually.”

The most significant move by Mistry so far has been his decision to abandon the $1.2-billion hostile bid for Orient Express by Indian Hotels. In May, the Tata Group announced a goodwill write-off of $1.6 billion.