House Of Tata

Acquiring a Global Footprint

Making Headlines

Aug 2007, Tata acquires Corus for $ 12.1 bn

Largest oversees acquisition in Indian history Corus was 4X larger than Tata steel leveraged buy out From 56th to 6th largest steel producer in the world Bought at a premium of 33.6% at auction

The M & A fever

Did Tata group management have the mindset and bandwidth to reap the benefits of its acquisitions? Was M&A the best route for group companies to build global businesses Should all 96 companies in the group seek global footprints?

House of Tata
1868 1874 1903 1907
Trading company

Textiles

Indias first luxury hotel

Indias first private steel player

Indias first private Airlines 1932 1953 all airlines nationalized

1968 1991

Software

300 Companies

 http://www.youtube.com/watch?v=rA11fVPlm3g

The TATA Empire

Tata Motors Tata Autocomp systems Voltas Jaguar & Land rover Tata Cummins Telco Construction Indian Hotels Tata AIG insurance Landmark Tata asset management Westside Tata realty and infrastructure
Service (7.3%)

Largest private employer

Tata Steel Tata steel processing JAMIPOL Tata advanced materials

Tata power Tata BP solar India Tata power trading Tata Petrodyne

Engineering (30.1%)

Materials (21.4%)

Energy (5.7%)

Rallis India Tata pigments limited Advinus Therapeutics Tata Chemicals

TCS VSNL Tata teleservices Docomo Nelco

Tata tea Titan Tata Salt Tata Swach Tanishq Tata beverages

Chemicals (5.1%)

Information systems and Communications (25.1%)

Consumer Products (5.3%)

Keeping it together

Tata sons maintain 26% equity for veto rights Brand Equity Pay and use Proceeds used for Umbrella promotion GCC & GEE to promote better strategy and combined financial strength Reputation in the face of competitive business environment

How the game changed

1991
Critically low foreign currency assets Liberalization More freedom at the price of more competition

Tata advantage
Foreign investors to tie up with local businesses Tata was a sought after partner

1997
Asian Financial Crisis Putting eggs in different baskets

M & A fever
2004 Indian companies could invest 100% of their net worth abroad By 2007 bar raised to 400% Borrowing Local and international allowed and other financing options made available FCCB, ADR & GDR

External cash flow increased by 777% in 5 years (2000 to 2005) compared to Chinas 55%
In 2006,
World M&A activity $3.8 trillion (record) India outgoing M&A - $9.9 billbion (double that of 2005 and for the first time, more than inbound M&A)

Why sell & Buy

Born Global

 Born Global
Insignificant local demand export to North America & Europe Delivery centres in India, Brazil, Australia, China, Hungary, Japan, Mexico & Uruguay By 2007, 91% of revenues from overseas M&A for building technological capabilities and to capture new markets through building internal staff capability

 Entered European market in 1990s Incurred significant losses

Better results in Middle east

NRIs were major consumers

Can M&A be used for consumer goods or only for B2B???

 Initially acquired properties in London and New York

Disinvested to maintain minority stake longer chain of hotels Emphasis on gateway cities Potential customer for Indian properties Finding the right chain