Tata Group has almost doubled the revenues and more than tripled the net capitalization and the market in the last five years, when he spent RS 5.5 Lakh Crore to be “Future Fit”, while the holding of the Tata Sons N Chandrasekaran Company, recently placed it after the news that broke out by Conglized Desi who observes another global fiction. Tata Motors is ready to buy Iveco from his main shareholder, the Agnelli family, for $ 4.5 billion, people aware of the discussions have told et. Iveco will be the second largest acquisition of Tata Group after the European steel manufacturer Corus that the group acquired in 2007 for $ 12 billion and renamed as Tata Steel Europe. Very few Indian conglomerates are pursuing the global scale with such consistency. The Iveco agreement, if it happens, will strengthen the long -term goal of the Tata group to be a competitive company globally rooted in India, but not limited by its borders.Read also: Tata Motors destined to acquire the Italian Iveco truck manufacturer for $ 4.5 billion in its largest deal to date
Because Tata continues to become global
Among the Indian conglomerates, the Tata group stands out for its global ambition. Most of his domestic peers focused on regional expansions or focused on the domain of Indian markets. But for the nanny, becoming global is both a philosophical commitment and a strategic lever. The ambition of the Tata group to become global, unlike most other Indian conglomerates, is reduced to a combination of vision, values, scale and long -term strategy. From his foundation days, Tata had a cosmopolitan mentality. Jrd Tata and later Ratan Tata believed that both Indian companies were to compete globally. Ratan Tata in particular has supported the global expansion to build international respect for Indian companies, not just profits.
Ratan Tata believed that Indian companies had to compete internationally not only as outsourcing offices or low-cost manufacturers, but as global brand-brand players, focused on research and development, based on the product. This ambition has not been guided exclusively by scale or prestige, but was based on the belief that Indian companies could generate jobs, technologies and reputation of higher value by participating in global markets, in particular in sectors such as cars, steel, software and consumer goods.The Tata group is large, diversified and financially robust, which makes it capable of absorbing costs, risks and complexity of becoming global. It has a management bandwidth, access to capital and governance systems to manage international mergers and acquisitions, unlike many family or regional Indian companies. The acquisition of brands instead of building them from scratch is a faster and more effective way for global expansion as it brings bases of faithful customers, advanced technology and established supply chains. Tata could never organically create brands like Jaguar and Tetley, so he bought and revived them.
The global acquisitions, therefore, have a double purpose for Tata. They diversify the commercial risk between geographies, reduce dependence on the domestic economy and provide access to markets with greater purchase and advanced regulation power. Equally important, they offer valuable technologies, operational processes and brands that can be linked to the Tata portfolio. The Iveco acquisition adapts perfectly to this strategy.Lessons from previous global acquisitions
Iveco is not the first attempt to globalization of Tata through a great acquisition. Over the past 25 years, it has designed some of the more high profile offers of India abroad, each with variable results and key lessons. The acquisition of Tetley of the Tata Tea 2000, the tea brand based in the United Kingdom, for $ 407 million was a first declaration of global intent. The agreement made the second largest tea company in the world and gave it access to the developed markets. Strategically, Tetley has strengthened the visibility of the Tata brand throughout the West. He has combined Tetley distribution and branding strengths with his tea plantations and low -cost supply in India.
Corus’s 2007 purchase by Tata Steel was even more ambitious, but much more turbulent. The value of $ 12 billion is worth, the agreement has made the fifth largest steel manufacturer in the world instantly. But he proved to be poorly timed. The 2008 financial crisis, combined with high -cost operations in Europe and competitive pressure of Chinese steel, has caused years of strong losses. Tata Steel had to undertake important cancellations, transfer activities and endure the political friction, in particular in the United Kingdom. In retrospective, Corus has held a good lesson in global M&A – Scala without synergy may not be so beneficial.
On the contrary, the acquisition of JLR in 2008 from Ford for $ 2.3 billion was widely considered a success, at least in the first decade. Under the property of Tata, Jlr witnessed a remarkable trend reversal. The infusion of capital, the innovation of the product and an aggressive thrust in China and other luxury markets have restored the profitability and trust of the market. However, from 2018 onwards, JLR faced its contrary winds: Brexit uncertainties, weak Chinese demand, wider move from internal combustion engines, etc. Tata replied with further investments, including plans for a 4 billion EV battery factory in the United Kingdom, but JLR’s future remains an ongoing job.
Tata is yet another global leap
The acquisition of Iveco, manufacturer of commercial vehicles n. 4 in Europe, it suggests that Tata has internal lessons from these past agreements. Unlike Corus, who was in a cyclical and high intensity of capital, Iveco operates in the segment of commercial vehicles that Tata completely includes well. And unlike JLR, which requested the repositioning of the brand and the massive renovation, Iveco already has operating strengths that can be reduced and optimized.
However, investors are cautious. Tata Motors’ shares decreased by almost 4% on Wednesday after news emerged on the acquisition, a sign that the market could be worried about the pure size of the agreement, the risks of integration, the profitability potential and the complexity of the execution. The memory of the previous global incursions is not completely faded, even if Tata’s financial metrics have improved significantly in recent years.
Tata Motors is already a dominant actor in the commercial vehicle market of India and has a growing presence in Asia, Africa and Latin America. However, its imprint in Europe was modest and largely limited to Jaguar Land Rover’s luxury offers. The acquisition of Iveco, based in Italy, would significantly change the one giving the heart of the European market and buses to the heart of the European market, not only that it is massive, but increasingly focused on electrification and on vehicles fueled to hydrogen.
Even more important, Iveco offers precious technological goods. He has made significant progress in electric buses and in the technology of hydrogen trucks, areas where Tata Motors has an ambition but a limited internal capacity. The integration of the research and development infrastructure of Iveco could accelerate the transition of Tata in sustainable commercial mobility.
There is also the geographical advantage. Iveco has a solid distribution network in Europe, Latin America and parts of Asia. With the production base and the depth of Tata economic engineering, the group could optimize the production between the regions, reduce the input costs and improve margins both in the Legacy and emerging markets.
“This is a big problem because Tata Motors’ CV affairs are late on internal innovation and product technology”, a former Tata Motors manager was mentioned in a report and a week ago. “They had lost their mojo for their main rivals. This will shake the place and excite the team.” What remains unclear are the needs of future investment and the long -term profitability profile of Iveco’s industrial activity, says the report. Having said that, there is a crucial difference from the acquisition JLR: Jaguar Land Rover was not generating much free cash flow at the time of his sale. Iveco, on the other hand, is. Investors will probably evaluate the acquisition of a company in the lower margin than the strategic value of the additional scale, access to the global market and potential free cash flows.
The move to acquire Iveco does not only concern the growth of the Tata engines. This is the Tata group that reiterates its status of a serious global industrial actor, willing to take risks measured to develop lasting skills through the borders. While many Indian conglomerates are happy to dominate nationally, the world view of Tata remains facing outwards. With every international acquisition, the group has perfected its playbook. Some bets hurt while others have fruit. But as a whole, they mark the evolution of an Indian company thinking, operating and competing on the world scene as a real blue multinational. If Tata Motors performs this agreement with clarity, discipline and strategic patience, the Iveco acquisition may not be only one of its biggest but also one of its best.
