Synopsis
“There is a strategic reason for not making any equity infusion even as organisational changes are being made,” said one of the persons. “However, new fund infusion will commence after the strategy and organisational changes for better operational efficiencies are in place.” Registrar of Companies (RoC) filings obtained through business intelligence platform Tofler show group holding company Tata Sons didn’t invest in Tata Digital in FY24.
Tata Sons halted fresh investment into its ecommerce and omni-channel electronics businesses such as super app Tata Neu, Croma, Tata Cliq and others in FY24, the first time in eight years that it has not pumped funds into them. The group wants to focus on rewiring strategy, improving accountability and operating efficiencies to ensure profitable growth, said people with knowledge of the matter.
It has invested an estimated Rs 19,000 crore till date in Tata Digital, the holding company for the group’s ecommerce businesses, the top executives said.
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“There is a strategic reason for not making any equity infusion even as organisational changes are being made,” said one of the persons. “However, new fund infusion will commence after the strategy and organisational changes for better operational efficiencies are in place.”
Registrar of Companies (RoC) filings obtained through business intelligence platform Tofler show group holding company Tata Sons didn’t invest in Tata Digital in FY24.
Widening losses
The latter didn’t invest in the group’s ecommerce companies, having been made their parent in the last two years.
Tata Digital is the holding company for Tata Unistore (which runs Tata Cliq), Innovative Retail Concepts (BigBasket), Tata 1MG Healthcare Solutions and omnichannel electronics business Infiniti Retail, which owns over 500 Croma stores. It also owns Tata Neu, conceived as a so-called super app.
In FY23, the combined losses of the largest of these businesses (Tata Digital, Croma, Tata Cliq and BigBasket) crossed ₹4,700 crore, widening from ₹3,130 crore in FY22. Tata Digital’s new CEO Naveen Tahiliani, tasked with its revamp, has imposed a tight control on costs to focus on a sharper data-focused approach to operations.
Tata Sons and Tata Digital didn’t respond to queries.
“Tata Sons has made significant capital allocation to businesses that need funds to grow,” said a top executive close to the matter. “However, there is a clear directive that there should be a deadline for profitable growth. Businesses then need to focus on good execution on ground to scale up. Until that happens, fresh allocation will not be done unless absolutely necessary.”
Fiscal consolidation
There is a renewed focus at Tata Digital to increase collaboration among businesses to ensure a better consumer experience and use data to make informed decisions. The group also has ambitious plans for payments. The Reserve Bank of India gave Tata Payments a payment aggregator licence earlier this year. Tata Payments, which runs a digital payments app, is also held through Tata Digital.
The lack of spending is a sign of fiscal consolidation, pushing the loss-making businesses to turn a profit, said executives aware of the group’s plans.
The Tata Group was a conservative investor in ecommerce until FY21 but had been pumping money into Tata UniStore and Infiniti Retail. Tata Digital was floated in August 2019.
As per RoC data, Tata invested equity capital of ₹3,462 crore in FY23 and ₹11,872 crore in FY22 in Tata Digital. In FY22, Tata infused around ₹12,000 crore into its ecommerce business — the highest till now in a single year. This was in order to expand operations into newer areas and meet increased costs of operation.
The Tata Group is yet to file FY24 financials for Tata Digital or the other entities with the RoC. The RoC filings showed Infiniti Retail’s net loss more than doubled in FY23 to ₹957 crore. Tata Cliq reported a 16% year-on-year jump in net loss to ₹874 crore in FY23, while Tata Digital’s standalone loss went up by 23% to ₹1,370 crore. Innovative Retail Concepts’ loss rose 89% to ₹1,535 crore.