Mistry banking on e-commerce to propel Tata valuation to $350 bn

At the end of 2014-15, Tata group's listed companies had a combined market cap of $134 billion

Last year, when Cyrus Mistry first articulated his ambition to push the Tata group's combined market capitalisation to a level close to that of the world's 25th-most-valued company, he knew this could not be done without going for e-commerce ventures.

At the end of 2014-15, the group's listed companies had a combined market cap of $134 billion, a level close to that of the 47th-most-valued company in the world. More than half of the combined figure, or about $80 billion, was accounted for by Tata Consultancy Services alone.

At present, no information technology services company figures among the world's 25 most-valued companies - global IT giant IBM, which is into services, products and hardware, and has a valuation of $154 billion, is ranked 47th. While most firms in the coveted top 25 list are product ones, such as Apple, Google, Microsoft and Oracle, the Tata group does not have any company dealing in technology products. The other type dominant in the top list is that of younger e-commerce ventures like Amazon and Alibaba - at 15th and 24th positions, with valuations of $251 billion and $200 billion, respectively.

"When the chairman came, he asked us to look at the digital space. We came up with these three e-commerce ventures," says Nirmalya Kumar, member of Tata Sons' group executive council. The group' assessment shows it will require a market cap of $350 billion to be able to match that of the world's 25th-most-valued company in 10 years.

"We are at the start of a digital revolution. Even today, it is at a very nascent stage in India, with less than one per cent of total sales being carried out digitally," says Kumar, formerly a professor of marketing at London Business School. He joined Mistry's Team-A two years ago and is now spearheading the group's e-commerce plans with three new ventures.

The ventures include an omni-channel e-tail one for lifestyle products, based on the marketplace model; the company has tied up with 80 brands to provide a differentiated experience to customers. Also planned is a health and wellness start-up to connect laboratories, pharmacies, doctors and hospitals. Both ventures are to be launched this year.

Besides, the Tata group this month launched a customer analytics platform for its companies; outside clients could join at a later date.

The plan to reach a market cap of $350 billion, requiring a compound annual growth rate of 10 per cent over the next decade, does look ambitious. But the Tata group has achieved much faster growth in the preceding decade (15 per cent CAGR) - a combined market cap of $134 billion at the end of last financial year, against $31 billion 10 years ago.

The journey ahead, however, is expected to be naturally tougher, with a higher base effect. While exploring new segments and launching new businesses has been in the DNA of the 147-year-old group - TCS being an example of a successful experiment - e-commerce is not the only bet being planned for bolstering market cap.

"To meet the vision, while the existing companies have to grow organically and inorganically, we might also go for some acquisitions at the group level," says Kumar, explaining the growth strategy.

For the existing business, one big thrust for growth will be tapping consumer-facing segments; the group expects middle-class consumers' consumption level to see rapid growth. Perhaps it is for this reason that those like Tata Chemicals, Titan and Tata Global Beverages are launching new products.