While the Tatas' acquisition of Corus Group for $12.1 billion has made even students and housewives notice their ambitions, lesser but quite significant developments in the group show a steady act of empire building by the satrapy controlled by Bombay House.
The group has so far made 22 acquisitions across sectors ranging from software, automobiles, tea, beverages, hospitality and steel. In all the group has spent a whopping $15 billion on overseas deals, including the latest one involving Anglo-Dutch steelmaker Corus. Each of them effectively represent Ratan Tata's strategic ambitions outlined in 2000.
"It is a must to have global size and global management expertise to face the competition being thrust upon in the liberalised economy," Tata is said to have told his key lieutenants in early 2000.
Within a day of sealing the Corus deal, Tata Chemicals on Thursday agreed to float a joint venture with Europe's largest fresh produce firm Total Produce Plc to set up distribution facilities of fresh fruit and vegetables across India.
Financial details were not released. The 50:50 joint venture company would create state-of-the-art distribution facilities across India by leveraging the individual strengths of both joint venture partners, Tata Chemicals said in a statement to the stock exchanges.
Total Produce, listed in London and Dublin, operates through its subsidiaries, joint ventures and associates from 66 retail and wholesale distribution facilities and five ancillary offices throughout Europe.
The share of international revenues in the group’s total revenues has increased to 30 per cent in 2005-06 from 24 per cent in the previous year and 21 per cent a year before that. In 2005-06, around 76 per cent of the sales growth came from acquisitions. The six major acquisitions accrued $1.5 billion revenues to the group.
More significantly, group’s total employees placed abroad increased to 31,360 in 2005-06 from 19,140 in the previous year - a growth of 64 per cent in a single year. During the period, group’s total employee strength has increased by only 16.4 per cent to 2.5 lakh as against 2.16 lakh in the previous year. Overseas employees now constitute 12.5 per cent of the group's total employees.
It was Ratan Tata’s vision when he utilised the cash flow of group companies to acquire firms across sectors. In fact, prior to 2004, Tata Consultancy Services (TCS) was a division of Tata Sons, the holding company, Tata used the cash generated from this company's public offering of shares to increase promoter holdings in all most all the leading group companies such as Indian Hotels, Tata Steel, Tata Motors, Tata Power and Tata Chemicals.
Experts feel that the now the situation is much different for Tata Sons. It is sitting on 80 per cent of TCS, the leader in India's software space, with a market capitalisation of around $30 billion. Tatas expect TCS to be in the global top 10 by 2010.
On a standalone basis, Tata Steel cannot afford to take the required loan to fund the equity part of the leveraged buyout of Corus, as it would create a huge debt burden. Cash from a further dilution in the Tatas' stakes in TCS could aid the steel deal, market watchers say.