Unity move: Tata Group to consolidate defence, financial, infra arms

Tata Sons Chairman N Chandrasekaran has started consolidation at the Tata Group by clustering all defence businesses under one company in order to make the business leaner from a loosely held conglomerate, and also tap opportunities arising from India's growing defence spends.

The group is also considering consolidation in its financial services businesses spanning corporate and retail lending to mutual funds and insurance, besides creating a larger infrastructure vertical by bringing all related companies under one umbrella. Some infrastructure businesses include Tata Realty and Infrastructure and consultant Tata Projects, The Economic Times reported on Monday.

Tata's defence businesses are presently dispersed across multiple units. Tata Advanced Systems, Tata Advanced Materials and Tata Industrial Services are standalone defence and aerospace businesses. The rest are part of companies such as Tata Power, Tata Motors, TAL Manufacturing Solutions, Tata Technologies, Tata Consultancy Services, Tata Steel, Tata Elxsi and Titan.

Tata's defence businesses clocked in revenues of Rs 2,650 crore in fiscal 2016, an increase of 7.5 percent from the year earlier. In the last five years, the group's revenues from defence and aerospace has grown at a CAGR of 18 percent.

"All companies working in security and defence will be brought under one umbrella. The thought has been there for three years. It is now finally moving ahead," a senior official familiar with the matter told ET. "This will help them big for larger defence projects with a higher net worth," he added.

The consolidation exercise will first look at merging unlisted companies in related businesses under one umbrella and later repeat the similar exercise in the listed companies.

Soon after becoming the chairman of group's holding company Tata Sons in February, N Chandrasekaran recruited several investment bankers, pointing to mergers and acquisitions as a key theme for the future. He appointed ace investment banker Saurabh Aggarwal in May as Tata Sons chief financial officer.

"The Tatas are getting into defence in a big way. Bringing all the companies together will bring synergies, coherence and avoid duplication. More importantly, they would need scale to benefit from the government's new 'strategic partnership' policy," a consultant told to ET.

"They need to have one holding company in defence that can then in turn have special purpose vehicles and joint ventures (with foreign players) to participate in strategic partnership programme," he added.