Tata is investing $90 billion to diversify industries in India, reversing the globalisation that drove the industrial conglomerate’s strategy for 30 years.
Boyden's perspectives on the news and trends that are transforming industries
In repositioning Tata, Chairman Natarajan Chandrasekaran sees broad possibilities for the world’s fifth-largest economy. “I firmly believe that this is going to be India’s decade,” he says. His plans centre mainly on new industries, including the creation of electronics factories and semiconductor fabs. He has already secured India’s connection to the Apple supply chain. The company’s focus on its home country reflects several broad trends: the movement of manufacturing out of China, the energy transition, and the industrial policies of Prime Minister Narendra Modi.
India is the world’s fastest-growing economy, and within it, Chandrasekaran’s empire is the mightiest by market value and operating profits. Tata’s planned $90 billion investment over the next five years, announced in September, could indeed take India in new directions. The industrial conglomerate’s plans encompass multiple industries in addition to electronics and chips, such as electric vehicles (EVs), battery gigafactories, renewable energy, and surprisingly, the nation’s flagship carrier Air India.
Tata is one of the world’s most important companies, due not only to its sheer size and scale, but also to its long record of stability. The Tata Group was founded in 1868, making it the world’s oldest independent company worth over $200 billion. It has repeatedly reinvented itself. Ratan Tata, Chairman from 1991 to 2012, took it global through major foreign acquisitions. This included Anglo-Dutch steelmaker Corus, which it bought in 2007 for $12 billion, India’s largest-ever takeover of a foreign firm.
Many other Indian companies followed Tata’s lead in globalisation. Between 2000 and 2008, annual investment by Indian firms abroad soared almost 40-fold, according to The Economist. The call to globalise was heard elsewhere as well; investment in foreign firms by all emerging markets quadrupled. But eventually, many multinationals found themselves overextended, including Tata. A period of turmoil culminated in the 2016 ouster of Chairman Cyrus Mistry.
Mistry was replaced by Chandrasekaran, a technocrat and CEO of Tata’s hugely successful IT business. His rise is emblematic of emerging markets’ faith in their own technological prowess. India has a highly advanced payments system in addition to its sophisticated IT industry. One of Tata’s rival industrial conglomerates, Reliance Industries, made a $46 billion 10-year investment in its domestic 5g telecoms business, Jio. Supply chains’ lessening dependence on China and the energy transition are presenting still more opportunities.
Powerful conglomerates like Tata now must decide how to capitalize on these opportunities. Reliance, as well as Adani Group, are casting their lot with Narendra Modi’s pro-business thrust. Tata is taking a more measured approach, balancing national development with profitable business. Tata’s investment will accelerate growth in strategic areas of technology and manufacturing, as Chandrasekaran envisions a “global opportunity for global companies to create a supply chain based in India”.
Energy transition is another key aspect of Chandrasekaran’s vision. Nearly $10 billion of Tata’s planned investment will go into renewables at its power subsidiary. There are plans to build gigafactories in India and Europe for use in Tata’s own EVs and those of other manufacturers. Tata’s market share in EVs is rising, and it is launching 10 EV models. Additional projects include manufacturing solar panels, where Tata once again hopes to challenge China.
