N. Chandrasekaran, who completes six years as the chairman of Tata Group, aims to build sizeable new assets under the conglomerate, leveraging the group's talent, brand and financial power. Once the business model is proven and cash flows are in sight, new businesses are to be opened for strategic investments and IPOs, he tells Fortune India in an exclusive interview. Edited excerpts.

During the initial phase as chairman, you were focused on simplification, synergy, and scale. What is your follow-up strategy?

You should see the group’s efforts as three distinct strategies. The first was strengthening the core, which ensured that every company is financially fit. I used to say fitness first, and performance next. We are pretty much done here as we fixed balance sheets and set the growth strategy of all companies.

Secondly, we are focused on the transition of existing companies with the help of digital technologies. The transition will be strengthened with the idea of sustainability and wellness and safety. It is playing out across the board with investments in EVs, renewables, new materials and chemicals, among others.

The third leg is the creation of great businesses for the future. We created firms for precision electronics manufacturing, 5G technology stack and digital SuperApp. We are building a world-class airline and an EV battery manufacturing plant. These are the businesses of the future.

We’re doing all these while continuing with simplification of existing businesses. Simplification is a journey and we have done a lot, but there is still more to do. Same with synergy. We combined the capabilities of group companies for businesses like FMCG, SuperApp, defence and electric mobility.

Every company, including Tier-II companies, is changing. Tata Chemicals, after transferring the consumer products business to Tata Consumer Products Ltd., is just focusing on their core strength and expanding the capacity of soda ash and sodium bicarbonate. They have also invested in a couple of other areas (prebiotic and specialty silica) and grew there. In the same way, next-tier companies Tata Elxsi Ltd. and Tata Communications Ltd. are focusing on their core strengths.

Scale is another topic. Different brands of Croma, Westside, Zudio and Titan are opening new stores. Tata Steel is acquiring companies and investing in greenfield capacities. Tata Motors is expanding its capacity. Earlier, they had the capacity for manufacturing only 20,000 EVs. It has increased to 47,000 in a quarter. The capacity is already much more. The same is happening in power.

The theme of ‘3S’ (simplification, synergy and scale) will continue while we pursue the fourth ‘S’, which is sustainability. We have got a group-wide sustainability plan. We launched a project called ‘Alingana’ (embrace) about two years ago for the sustainability initiative. We will be carbon net zero by 2045 at the group level.

We have got separate sustainability targets for companies. It is not sustainability for its sake. In fact, we are changing the business model for the transition to sustainability. Tata Motors will make more EVs than IC engines in 2030. Tata Power will produce significantly more renewable power than thermal. My view is that renewables will constitute 85-90% of power production by 2030.

Supply chain is the next focus area. It will not only be the supply chain resilience of the group, but also supply chain opportunities. We will create multiple businesses which will be the hub for the global supply chain. Our aspiration is not only for supplying to our companies or the country, but also for the global market. It will play out as the fifth ‘S’.

A new battery company has been formed under Tata Sons Ltd. with this intention. It is separate from the battery packaging business under Tata Autocomp. We want to become a formidable player in precision electronics manufacturing and most part of the semiconductor value chain. I don’t know today whether we will be in the entire semiconductor value chain or 80% of it. But we will be a significant player.

The group is also committed to being a large player in the telecom technology space. We are consolidating all our telecom equipment and technology offerings under Tejas Networks which we acquired recently. There are also a couple of other units in Tejas now.

Covid-19 exposed weaknesses in the system as well as accelerated tech transition. What are your learnings?

In the last two years, the world has gone through something we have never seen and imagined. We are also going through a geopolitical crisis and recession fears. Growing inequalities is another issue. Amidst all worries, we have seen the rise of tech and cryptocurrencies.

Key trends that emerge from the situation are the creation of strong supply chains, faster digital adoption and access, growing focus on sustainability and energy transition, and importance to health, wellness and safety. India has a huge potential to become the global supply chain hub. Another aspect is that most businesses will have sustainability and wellness deeply embedded in everything they do.

Tata Group had to hold back growth investments and embark on debt reduction during Covid. What was your financial strategy?

We exercised financial discipline during this time. Many advisers told us that liquidity would become a problem and advised us to raise capital. But we went with the contrarian approach. In one of the online meetings of group CEOs, we decided to manage the businesses with cash flows. We conserved cash and didn’t increase debt in any of the companies.

I had frequent calls with CEOs at that time to discuss business. It was for understanding whether anyone had a problem. Tata Sons was ready to step in. We had communicated to companies since the beginning that the holding company would pump in money if they had any issues. But everyone managed and their numbers improved a lot.

Project delays were not because of capital shortage but shortage of workforce. We were not getting workers at construction sites. But we caught up with everything later, whether its expansion in steel, or capacity addition in automobile or renewable power projects. We brought everything on track without leveraging the balance sheet.

How do you plan to turn around the aviation business and make it financially self-sustainable?

We want to create a safe, respectable, world-class airline with the help of advanced technologies. It will give graceful service for all passengers irrespective of the class they travel. So, we really have a big aspiration for Air India. We will scale it up.

We will integrate all the airlines over a period of time. The fleet size will be enhanced. We will have strong operating entities for maintaining aircraft and engines, customer service and loyalty programmes, which are being integrated with Tata Neu.

We have a big plan for Air India, but it will take time. Just to get one issue fixed takes months. The machines were not looked after for a long time and systems are not there.

However, Air India will turn profitable. It is a big opportunity. We will expand internationally and also domestically.

What will be the mother brand of the airline business? Will it be Air India?

We will keep the Air India brand. We have announced the integration of Vistara and AirAsia with Air India. The legal process has started.

We want the airlines to have service skills with the aid of technology. We will have both full services and low-cost carriers. Vistara is a full-service airline and has created a brand for itself. Though Air India is a full-services airline, it was not functioning well. Both Air India and Vistara are now well placed to compete with the best in the world. So, we will benchmark ourselves to the best.

How do you plan to expand the product offerings on SuperApp?

We’re optimising the synergy of consumer companies for the SuperApp. We already have three big platforms — BigBasket, Tata 1mg and Croma. We will strengthen the travel vertical with hotels and airlines, including Air India. We will bring our fashion brands and Tanishq. We are enhancing the financial services footprint — lending, insurance and payments — as new demands will originate from Tata Neu. It is a journey that is not going to happen next Monday.

There is a significant volume of investments coming in the renewable energy business from Adani and Reliance. How do you want to position yourself?

We have said we are not making any more investments in thermal. We will provide only the maintenance capital. These businesses have PPAs until 2033-35, and then it will run off.

We have 5 gigawatt (GW) of renewables currently. It will become 15GW by 2025 and substantially higher by 2030. We have four renewable businesses — industrial renewable (big solar and wind power production facilities), rooftop solar, solar pumps and micro-grids. In distribution, we have 11-12 million consumers and we want to expand it to 40 million.

Tata Power Solar is already in the manufacturing of solar panels and expanding the business by building new capacities. We are scaling up R&D to strengthen the business.

The narrative about Tata Power has changed. We have moved away from the problem of losses at Mundra plant. It has also been reflected in the market value. The whole set of actions in renewable is now keeping all interested in the company.

What is the new strategy for steel, especially in turning around the U.K. assets?

In steel, we took the call to shift focus to India. We have built and acquired capacities here. We started scrap-based electric arc furnace projects. We want to add more such 1 MT projects.

If there is a future opportunity for acquiring something, we’ll look at it. The company’s balance sheet is strong and the leverage is completely under control. In fact, we need to see how much more to reduce the debt and how much equity you want to put in. Bringing the debt down to certain levels will make the capital inefficient.

Transition to green steel is important. Steel manufacturing will take another 20 years to turn carbon neutral as the technology is not mature yet. We are piloting a lot of different technologies in India and Europe.

The transition to sustainable practices is needed in the U.K. business and we’ve been talking to the government. We are waiting for its view. The coal-fired blast furnace-based plant in the U.K. needs to be transitioned to electric arc furnaces for producing green steel.

How far has the semi-conductor manufacturing JV with Renesas progressed? What will be the investment required?

The semiconductor business has got multiple legs — manufacturing and building scale, assembly, testing and packaging, and fabrication. More importantly, we need to have the right skills and capabilities. It’s not just about putting capital. We can allocate $5 or $10 billion. But that will be in vain without the right skills.

We are building our own design house. We are getting better in precision manufacturing and adding scale at the plant in Hosur (Tamil Nadu). We are in discussion for packaging, assembly and testing. We will have to get into fabrication at some point in time. It will take time.

We intend to work with multiple global players, but the details are yet to be worked out. Precision manufacturing is essentially for global players.

You have set the target for net-zero debt for many companies. What are your broader capital and debt strategies?

Tata Sons’ capital will largely go towards new businesses, because every traditional business can fund its growth. We will step in if they face any capital shortage. Tata Steel is financially independent. Tata Motors and its subsidiary businesses, including EVs, commercial vehicles and JLR, are producing strong operating cash. Tata Power is producing enough EBITDA to be able to fund its growth. This is the case with most companies.

As the incumbents in the auto business raise their investments in electric mobility, how do you plan to build on the head-start that Tata Motors has got?

When the automobile industry was less clear about the EV transition, we took the call to pivot the business. I had a long debate with Shailesh Chandra (CEO, Tata Motors PV business) before we finalised the EV shift. After we took the decision, we decided that it should never be a half-hearted move. We put the full weight behind it. You need to be careful and should have conviction while approving ₹1,000 crore-plus capex.

We still have a lot to do. We have to come up with attractive products and win in the market every day. We need to give great buying and service experience to customers. Our cars should be available in different price ranges. We should add more features and offer great technology. There should be a charging interface at every touch point.

Nowadays, many people whom I meet praise our electric cars, “Your cars look stunning. The design looks nice,” they say.

What was the reason to bring in an external investor in the EV business as we have seen the same in the renewable power business?

Some of these things are important because of two-three reasons. The EV business has been carved out and we have funded it adequately. Tata Sons can put in more money. But when you bring an external investor, it validates the strength of the business and adds a bit of rigor.

That’s accountability. So, that is one of the reasons why we said we’ll give out at least 10% stake to get the best partner. I’m happy that we partnered with TPG Climate because they are focused on the EV space. BlackRock, which invested in Tata Power, is completely focused on sustainability. So it’s important to have external investors because they have global perspective. They are in many markets.

Will you bring similar investments in Tata Digital, Tata Electronics and the battery business?

At some point, we will do it. Nothing in a hurry. Everything has to make sense.

What about the public issues of these companies?

Eventually, these new businesses will mature to go for public issues. Once the business model is proven and cash flows are in sight, we can think about it. I think every new company has got a business case. They should operate at the best metrics that a particular sector can operate in.

Why did you exit the telecom consumer business?

We were not a significant player in telecom. We were at fifth or sixth. The company was financially weak and we didn’t have the right network. We were more in 2G and not in 4G. We were making huge cash losses. We had a debt of almost ₹38,000 crore. Over and above, there were spectrum debts and Docomo payments. We had to take the call to solve the problem. At that time, putting ₹50,000 crore to solve the problem and spending another ₹50,000 crore to build it as a new business was not financially sensible. Moreover, it needed more capital to compete in the market. When will we see the cash flows after making such huge investments?

The government is expecting increased private investments to boost economy. What kind of overall investments the group is expected to make in the next three years until 2025?

We have a huge commitment on capital. We will invest $90 billion in the next five years. Most of it will be in India. We want to be future-ready and create future businesses with strong balance sheets in the next five years. We want to see what impact we can make on society. We want to maintain the value of the Tata brand.

What is your expectation about the Indian economy? Will it reach $8 trillion by 2030?

I am quite bullish about the economy. The numbers may vary between $7 trillion and $9 trillion. The growth is going to be good if we ensure we don't make mistakes. We need to continue making the right policies.

We should not have blocks on the way. Most of the time, corporates try to run fast. If there are blocks, the chances of fall are high. If three people fall, everybody will say that running is bad. That is what happened in the case of huge NPAs. When one ILFS happens, 10 people will get cold.

The challenge is in running smooth. If we hop, hop and run, we will fail. The road should be clean and have no blocks.

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