ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Companies

Tata Group pivots back to India as global expansion sours

Home market offers better prospects while UK investments face Brexit risk

Tata Motors has expanded its market share in India, now the world's fourth largest auto market. (Photo by Akira Hayakawa)

MUMBAI -- Top Indian conglomerate Tata Group has shifted its focus back to the booming home market as earnings falter at high-profile European acquisitions in cars and steel.

The group's setbacks were shown in striking fashion by the nearly $4 billion quarterly loss reported last week by automotive unit Tata Motors. Shares in the parent of U.K.-based Jaguar Land Rover tumbled as much as 30% on Friday, its sharpest decline in 26 years.

Automobiles generate more than 40% of the total annual revenue topping $100 billion at the 150-year-old conglomerate, which has more than 100 companies under its umbrella.

Its purchase of the storied British car company made a splash in India's former colonial power. Now, just over a decade later, India is poised to surpass the U.K. as the world's fifth-largest economy, and India's markets for autos and steel show better growth prospects than those in Europe or China.

The massive loss at the group's biggest revenue driver stemmed from write-downs at Jaguar Land Rover, which saw its unit sales in China plunge 47% on the year in the October-December quarter, compared with a 6% decline worldwide. Big discounts aimed at shoring up sales in the slowing Chinese economy eroded profit.

With Britain poised to leave the European Union at the end of March, the impact of Brexit on Jaguar Land Rover will depend on how the yet-to-be-determined process unfolds. Tata Motors' earnings presentation cited the U.K. and China as having the most challenging market conditions.

By contrast, India was the only green traffic light on the map. Natarajan Chandrasekaran, the chairman of Tata Motors as well as group holding company Tata Sons, said the automaker's domestic business has strong momentum.

Tata Motors expanded its Indian market share for both the passenger and commercial segments in the April-December period. India became the fourth-largest market for new autos in 2017, surpassing Germany as volume exceeded 4 million units.

The automaker said that year it would invest 40 billion rupees ($567 million) annually in domestic operations for two to three years, speeding the rollout of new models.

In steel, Tata Group is moving to streamline loss-making European operations acquired when Tata Steel bought Anglo-Dutch group Corus in 2007.

Tata Steel awaits regulatory approval of a merger of European operations with German peer ThyssenKrupp. The merger plan followed an unsuccessful attempt to sell off struggling U.K. steel operations -- the sale fell apart after the 2016 Brexit referendum.

More recently, Tata Steel decided last month to unload about 70% of its steel assets in Southeast Asia. By contrast, it is pouring more resources into the home market. The company acquired an Indian steelmaker in November and has begun work to boost capacity in eastern India.

India's crude steel output rose 4.9% last year to 106.5 million tons, the World Steel Association says, second only to China. Demand for steel materials used in homes and infrastructure is expected to grow.

A common thread in Tata's struggling auto and steel businesses is U.K. acquisitions in the 2000s, when the group accelerated its overseas expansion during under the leadership of then-Chairman Ratan Tata.

But conflict between Ratan Tata, now emeritus chairman, and successor Cyrus Mistry, who took over in 2012 and was later pushed out, led to turmoil in the group's management. This may have hurt its ability to keep a steady supply of talent to maintain competitiveness in the rapidly growing overseas operations.

The group's chemical business has also lost steam overseas. With production and pension-related costs rising in continental Europe and the U.K., Tata Chemicals saw its profit fall in the October-December period. The company plans to invest 24 billion rupees in domestic operations, a profit driver, to boost production of soda ash and salt.

Information technology unit Tata Consultancy Services, which generates the majority of its revenue abroad, relies more on the U.S. market than Europe.

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends October 31st

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media