Big challenge for the group

If you look at the sales and market cap of the Tata group overall, there is a high degree of concentration. If you look at top line revenues, then most of it comes from Tata Motors, Tata Steel and TCS. If you were to look at profits, then TCS is head and shoulder above the rest and perhaps Tata Steel will make a big push this quarter. If you look at the market cap, then it is  again dominated by TCS followed by Titan, Tata Steel, TAMO and Tata Consumer. It is this skewed mix of companies that Tatas want to change. When the Tata group prepared its blue print in the 1990s, the big focus areas were software, steel, oil, telecom and automobiles. Software is the one area where the group made rapid strides. Its auto business has built top line with JLR but profits and valuations have been too erratic. Steel is an area where the Tatas have expanded their capacity and foot print, but this business is too cyclical. The telecom business is history, with only TCOM remaining and Tata Tele sold to Bharti. Oil never took off, and that is where the Tata group finds itself today. 

Big bets on EVs and digital

If you go by the recent actions and the statements coming from Tata Sons, the big bet for the future appears to be on digital and on electrical vehicles or EVs. Look at some of the initiatives. Tatas paid top dollar for a stake in Big Basket and now plans to combine all its digital forays under one ecommerce platform to make the digital foray simple as well as centralized. On the EV front, Tata Motors is planning to invest more than Rs.20,000 crore in the current year to expedite the shift to EVs. As per the Tata Sons chairman, the idea is to move from 2% EV density to 25% EV density in the next 5 years. That is going to be a huge task but that is what the Tata group is betting on for their future. 

Actually, Tatas are right

In the last 25 years, the fortunes of the Tata group have been overly reliant on the TCS story. Over the last 10 years, the profit contribution of Tata Motors and Tata Steel have almost been neutral and it is only TCS that has flattered the markets quarter after quarter. Tatas do realize that they cannot rest on the past laurels any longer. It is time to bet on two of the biggest trends of the next 20 years viz. digital and EVs. Th stories of Tesla and Amazon are hard to miss. For a large group like the Tatas, it is not just about profits and market cap. It is also about being in the right place at the right time to be an important player!