Mumbai: The Tata group as a conglomerate has not faced a significant fallout from the global credit crunch and the group’s top officials do not expect the squeeze to have a big enough impact on its acquisition appetite.
The salt-to-software group has made several big-ticket overseas acquisitions recently, including the country’s biggest yet, the $12.9 billion (Rs50,826 crore) purchase of Anglo-Dutch steel maker Corus by Tata Steel Ltd earlier this year.
The credit squeeze resulting from the subprime crisis has made financing more costly and harder to come by around the world, and is expected to slow the pace of merger and acquisition activity.
“So far, there hasn’t been any measurable impact on our business,” Alan Rosling, executive director of Tata Sons Ltd, the holding company that oversees the group’s businesses, said at the Reuters India Investment Summit.
“We don’t expect any dramatic impact...the impact on us will perhaps be less than on other people because we’re a strategic industrial buyer with a strong balance sheet. There may well be some opportunities for us in this.”
Tata Motors Ltd, India’s top auto maker, is on the shortlist to buy Ford Motor Co.’s Jaguar and Land Rover brands, along with a joint bid from rival Mahindra & Mahindra Ltd and Apollo Partners, and JPMorgan Chase & Co.-backed One Equity Partners.
Rosling declined to comment directly on the deal. He later made a general observation that in the current credit situation, the group may have an edge over private equity firms in competing for assets.
The Tata group, one of India’s largest conglomerates, expects to earn more than half its revenue overseas in the current fiscal year as it ramps up businesses ventures, including hotels and autos, in markets from the US to South Korea.
Its drive for a more global profile will focus on itssoftware, steel, automotive,tea and telecom businesses, which accounted for about 85% of the group’s international revenue in the fiscal year to March 2007, Tata Sons’ executive director said.
“In just about every business we’re in, we may be quite competitive, but in some of our businesses we are much smaller by way of scale than our global competitors,” he added. “So the expectation is to grow these businesses more significantly.”
The group, which comprises nearly 100 companies, will focus on developed markets including the US and the UK, as well as emerging markets including China, South Africa, Latin America, West Asia and South-East Asia, he said.
“Our present position in China is still underweight, but if we want to be more competitive globally, we need to have a more significant presence there,” Rosling, a former investment banker, said.
Tata has sized up big China purchases in the past only to be deterred by corporate governance concerns and regulatory blocks. The challenge was to identify such legal and geopolitical risks and other global challenges, including currency volatility, and manage them with greater sophistication, Rosling added.
Asked about the impact of BHP Billiton’s proposed takeover of miner Rio Tinto Plc. on Tata’s businesses, Rosling said securing raw materials is important. “Consolidation of raw materials’ firms is something we have to watch,” he said. “We view raw materials security as very important.”
One way to mitigate risk and get quicker access to key markets and new technologies is to forge joint ventures, Rosling said. REUTERS