Tata Group is said to mull streamlining of tech operations

[MUMBAI] Tata Group, the Indian conglomerate that manages more than 100 operating companies, is weighing a plan to streamline its technology and infrastructure businesses, people with knowledge of the matter said.

The conglomerate is considering a restructuring that would see several of its technology businesses moved under publicly traded Tata Consultancy Services, according to the people.

TCS, Asia's largest software maker, is the most valuable of the group companies with a market value of about US$74 billion.

Tata Group, which wants to reduce the number of companies it oversees, may sell some smaller units that don't fit with its strategy, the people said, asking not to be identified because the information is private.

Tata Group hasn't made a final decision about which companies would be folded under TCS, the people said.

It controls Mumbai-listed Tata Elxsi, a product engineering firm with a market value of about US$826 million. The group also owns Tata Interactive Systems, which sells computer-assisted learning products, as well as closely held outsourcing provider Tata Business Support Services.

"This is a good and focused move by the conglomerate to promote synergy of the talent and resources which are spread out thin currently," said Nirmal Gangwal, founder of Brescon Corporate Advisors.

"This will bring lot of rationalisation and will weed out several units that are irrelevant and unviable."

Shares of Tata Elxsi rose as much as 3.5 per cent in Thursday trading, the biggest intraday gain in more than two weeks. The benchmark S&P Sensex Index fell 0.2 per cent at 12.51pm in Mumbai.

Deliberations are at an early stage, and there's no certainty they will result in a transaction, the people said. A representative for Tata Group declined to comment.

Since joining earlier this year, new Tata Group chairman Natarajan Chandrasekaran has been seeking to revamp the US$100 billion conglomerate, which makes everything from table salt to luxury cars. Tata Group said in May it hired former investment banker Saurabh Agrawal as chief financial officer, filling a role that's been vacant for five years.

Mr Agrawal was previously chief strategy officer at Aditya Birla group, where he recently helped put together some of the conglomerate's largest deals. Earlier this year, Tata Group also hired dealmaker Ankur Verma, who was Bank of America's head of India mergers and acquisitions for technology, media and telecommunications as well as oil and gas.

Tata Group is also considering a plan to merge several infrastructure businesses into a single company, the people said. Its Voltas affiliate, which makes most of its money providing air conditioning systems, also offers engineering services and develops turnkey water treatment projects.

Closely held developer Tata Realty & Infrastructure has a business that builds bridges and airports, while Tata Projects works on roads, railways and power transmission networks.

"In the case of infrastructure, there could be benefit on the funding side," Mukul Kochhar, head of institutional sales at Investec's India unit, said by phone Thursday.

"The merger has to be done on a case-by-case basis and has to be seen in terms of synergies and benefits."

BLOOMBERG