Tata loses some ground on domestic front as it focuses abroad

Tata Power will soon become a distant number two in private sector power production with Adani Power acquiring the 600 MW Korba West unit from Gautam Thapar-led Avantha Group. The billionaire Gautam Adani-promoted company is set to become the largest private sector power producer with installed capacity of 11,040 MW.

Currently, Adani Power has operational capacity of 8580 MW against Tata Power’s 8,613 MW. But it is soon going to announce the commissioning of the fifth unit of 660 MW at Tiroda in Maharashtra. Besides, the completion of the acquisition of 1,200 MW Udupi plant from Lanco Infratech and 600 MW Korba West unit will take its total capacity to 11,040 MW.

This is the second core business where the century-old Tata Group lost its leadership position in the domestic market. Earlier it became the number two steel producer in the country when Sajjan Jindal promoted JSW Steel took its domestic production capacity to 14.3 million tonnes by completing the acquisition of Ispat Industries in 2011. The company plans to take its total capacity to 40 million tonnes by 2025 with a six million tonne-brown field expansion at Bellary and setting up greenfield plants in Jharkhand and West Bengal.

Tata Steel currently has 9.7 million tonne capacity at Jamshedpur and it is developing a six million tonne plant at Kalinganagar. In 2007, it acquired Anglo Dutch Corus for $12.1 billion to become the number five steel maker in the world with a capacity of 25 million tonnes. But this became a drag on company's financials as demand slumped in Europe post the economic crisis of 2008.

“It is possible that in its effort to become a global power house Tata Group lost some ground to its domestic rivals,” says Dhananjay Sinha, economist and strategist at Emkay Global Financial Services. Tata Steel could not be as aggressive in bidding for Ispat Industries as its hands were already tied up with strained financials of Corus.

The Group has also lost ground in the domestic market in the passenger car business with Tata Motors slipping to number five in the last couple of years from its earlier position of third. It has been overtaken by domestic rival Mahindra & Mahindra and Japan-based Honda Motors. Tata Motors acquired Jaguar and Land Rover for Rs 9,200 crores in 2008, which has proved to be a money spinner. But in the domestic market the company has lost its edge.

“Despite their overseas forays Tata Group essentially remains an Indian group and their losing ground in domestic market is more by accident than by design,” says Jacob Mathew, managing director at home grown investment banking firm Mape Advsiory Group. The group, however, remains a dominant player in industries such as IT, hospitality, commercial vehicle, tea and jewellery retail.