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“Conserving cash for 2020-21 is our message to all group companies,” said N Chandrasekaran, chairman of Tata Sons, in an exclusive telephonic interview with ET on Wednesday. Group CEOs have been asked to become more agile and step up collaboration in businesses and get aggressive on digitalisation, he said.
“Every country is at a standstill as far as jobs are concerned, and GDP everywhere will be hit. In India, a huge shrinkage of GDP, of around $250 billion, is expected. We need to quickly get the economy back on track post the crisis to address it,” Chandrasekaran said. Transactions are not happening and debt is piling up in the economy, which was already slowing down before the health crisis struck. Several industries, especially SMEs and microenterpreneurs need a lot of external support to survive, he said.
Sectors such as construction, automobile and logistics have to be revived, to ensure that people get back to work. “Liquidity and timely stimulus are critical, through maybe interest-free loans or moratorium, along with food security to get our economy back to growth quickly,” he said.
‘Tough Calls Have to be Made on Portfolio Rejig’
“The biggest challenge is the uncertainty about how long will this health crisis last. Essentials like consumer and retail will come back but to get people back to work, some stimulus is required,” Chandrasekaran said.
Responding to a query on the impact on group companies such as Vistara and Indian Hotels, which are expected to see a severe impact on revenues, Chandrasekaran said it was up to individual firms to ensure that their business was viable. “Tata Sons will only do the scenario planning, ultimately we are also a shareholder. Each company will review its HR policy, revenue planning and ways to manage cashflows. We will be compassionate and each company will take a decision individually to ensure a viable business.”
Group companies have also been asked to rejig annual plans given that revenues are expected to be significantly impacted as a result of the ongoing crisis. The Tata Group had earlier said that it would continue to pay temporary workers for the period they had not been working. “We have made a commitment to the 100 million bottom of the pyramid workers,” Chandrasekaran said.
The group chairman also said that the crisis will lead to tough decisions in terms of portfolio restructuring, which is intended to ensure a mix of growth and cash businesses.
“The portfolio restructuring plan will in fact be accelerated. We have already lost valuable time and what is not sustainable will be reviewed and some businesses may be restructured to have a digital face,” he said. “While addressing the issue of portfolio restructuring, tough decisions and calls will have to be taken and that will have people implications,” he said. “As a group we will be compassionate and always handle the people issues with fairness.”
Medical Venture
The Tata Group, which has also begun manufacturing ventilators to assist the government in tackling the Coronavirus crisis, will also start making other medical devices. “We always had a plan but now the seed for our medical venture business too has been sowed,” he said. The Tata Group has already begun collaborating to procure personal protective equipment (PPEs), make masks and sanitisers and disinfectants. It has also offered help to get hospital beds ready and accelerate the manufacture of ventilators.
On the automobile sector, Chandrasekaran said the passenger car and the commercial vehicle market has already bottomed out before Covid-19 happened. “These sectors can now come back faster having hit a low. A little push with stimulus can help these sectors revive and get many people back to work which is critical for the economy to revive,” he said.
Concerns about global businesses such as Tata Steel Europe, JLR will be addressed by the global entities, he said. “Every government has offered to help and protect industries and jobs. So we all are going through the processes and hoping for timely intervention by respective governments to save jobs,” he said.
Tata Sons has infused Rs 20,000 crore of growth capital in group companies over the last three years. In recent years, consumer focused group companies such as Titan, Trent, Indian Hotels Company Ltd (IHCL) and Tata Global Beverages Ltd (TGBL) grew faster than flagship companies such as Tata Steel, Tata Motors and Tata Power, which have been struggling in an economic downturn.
‘Digital Distancing’
“Digital distancing” will be the new business norm. “Digital-led and contactless experience will play out in terms of experientialled interface. Countries are likely to be careful about allowing tourists for a while. People won’t travel and take health risks with either leisure or work. So business related travel will be more digital .Going ahead, basic elements such as safety, trust and transparency will drive the future. There will be a lot of focus on domestic supply chains and trusted supplies in terms of cross-border sourcing,” he said.
“What we are witnessing is unprecedented. There are too many variables and there will have a huge impact,” he said, depending on how long the lockdown lasts and the pace of revival thereafter. “This crisis is different from earlier ones. When we look back, we will see life as ‘before Corona’ and ‘after Corona’. I am an optimist and I am sure that the economy will bounce back. While the economy has been hit, how fast we recover will depend on how agile we are. But there are no blanket answers on lifting the lockdown. If it’s not lifted, the economy suffers. If it is, it brings in other problems. The question is how do we flatten the curve. So different data points have to be put together and decided by the government.”
Chandrasekaran said that while fundamentally Tata value systems will remain unchanged, there will be a distinct change in the group work culture. “Every crisis also brings opportunities. Businesses today have no choice but to adapt quickly to market changes and be agile to be sustainable. The Tata Group will ensure that we do that,” he said.
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