Ratan Tata's Remarkable Journey: Exit Career, Mega Acquisition | people

However, Tata also inherited a diverse portfolio of consumer products, one of the largest in the private sector at the time. In the early 1990s, Tata Lakme Limited (cosmetics and personal care), Tata Oil Mills (soaps), Goodlas Nerolac (paints), Marind (pharmaceuticals), Voltas (air conditioners and) became the major players in various consumer segments. refrigerators), Titan Industries (watches), Tata Tea, Tata Coffee and Tata Press (printing and publishing). The group was a major player in computer hardware through a joint venture with IBM and Tata Telecom, in partnership with AT&T.

Despite their profitability and strong market position, these ventures, with the exception of Marind, do not fit into Tata's vision of a globally competitive portfolio to grow in an era of globalization and free capital flows. He predicted challenges to the long-term viability of domestic consumer goods due to India's relatively small consumer goods market and the established position of multinationals in the space.

A severe economic recession in India in the late 1990s and early 2000s required the reduction of the group's extensive portfolio. Between FY97 and FY01, the group's revenues fell by 5 percent, while net profit fell by 85 percent, from Rs 2,344 crore in FY97 to just Rs 354 crore in FY97. 2001.

Ratan began rationalizing the Tata Group's portfolio to free up capital and management resources where Tata had the potential to become a world leader. The recession also encouraged geographic expansion to reduce financial risk.

The first was soap maker TOMCO, which was sold to Hindustan Lever (now Hindustan Unilever). In 1997, the group exited the cosmetics and personal care business, selling the Lakme brand to Hindustan Lever for Rs 200 million. Lakme Limited was renamed Trent, which opened its first store in Westside in 1998, marking the group's entry into organized retail.

The group's divestment continued: in 1998, Voltas spun off its household appliances and refrigerators businesses into a joint venture with Electrolux, focusing instead on air conditioners, commercial refrigeration and contract manufacturing. In the same year, Tata exited the pharmaceutical sector by selling Marind to Oakheart for Rs 95 crore, having previously divested the pharmaceutical divisions of Rallis India and Lakmé due to lack of scale and profitability.

In 1999, Tata sold its remaining 25.85 percent stake to Goodlass Nerolac for Rs 98.56 crore to Japan's Kansai Paint Co, which exited the paint business. The group has further simplified its exit from the computer hardware sector by ending a 50:50 joint venture with IBM. ACC, India's second largest cement producer at the time, also exited Tata's portfolio when Tata was unable to increase its stake; In 2000, the group sold its remaining stake to Ambuja Cement.

A bigger spread

At the same time as consolidating its domestic presence, Ratan Tata began expanding its parent companies globally. Tata Tea (now Tata Consumer Products) led the way, acquiring Britain's Tetley for $432 million in 2000, making Tata Tea the world's second-largest branded tea company after Unilever. At the time of acquisition, Tata T had a market capitalization of around $500 million and reported a net profit of $30 million in FY99.

In 2002, Tata Sons acquired a majority stake in state-owned Desh Sanchar Nigam Limited (now Tata Communications) for Rs 2,599 crore, strengthening its position in the fast-growing telecommunications market.

In 2004, Tata Motors made its first international acquisition when it purchased Daewoo Motors' heavy vehicle unit, becoming one of the world's largest truck manufacturers. The following year, it acquired a 21% stake in Spanish luxury bus manufacturer Hispano Carrosera SA, with the acquisition of Jaguar Land Rover for US$2.3 billion in 2008, catapulting Tata Motors to the position of leading automobile manufacturer. worldwide. Its revenue more than doubled the following year. Between 2004 and 2008, Tata Chemicals, Indian Hotels and Tata Steel also pursued a series of acquisitions, notably Tata Steel's US$12.2 billion acquisition of Corus in 2007 during the steel boom.

These acquisitions led to rapid growth in the group's revenues and assets, but increased borrowing and financial stress, which proved challenging during Lehman's post-2008 crisis. The acquisitions led to rapid growth in the Tata Group's revenues and assets between 2002 and 2009, but came at the cost of a significant increase in loans and debt. Between fiscal 2002 and fiscal 2008, the group's combined revenues, profits, assets and loans grew at a compound rate of 40.8 percent, 76.9 percent, 31.3 percent and 29.5 percent. percent, respectively. As a result, the group's balance sheet leverage ratio has increased from an all-time high of 1.84x in FY09, 1.21x in FY02 and a healthy 0.52x in FY05.

These financial pressures were exacerbated when the 2008 financial crisis triggered a global recession and a sharp decline in corporate profits. Tata Group's consolidated net profit fell 54 percent in FY09, with a further decline of 7.4 percent the following year. Similarly, the group's consolidated net sales fell 6.7% in FY10.

Tata Motors, Tata Steel, Indian Hotels and Tata Global Beverages (now Tata Consumer) were most affected by the aftershocks of the crisis and debt-fueled acquisitions. However, none of these companies faced an existential threat thanks to Tata Sons' financial resources and Tata Consultancy Services' steadily rising dividend income. The majority of the group's companies overcame these challenges and are once again on the path to growth.