What is the purpose of Tata group looking to monetize its digital businesses by getting investor participation in it?
Answer
Answer
Even as the Tata group is grappling with the likely shift in control of the Mistry stake in Tata Sons, it is going ahead with its larger plan of reducing the leverage of some of its most indebted entities like TAMO and Tata Steel. One method could be digital monetization.
These may still be early days to get any clarity yet on the subject. However, Tata Group is already in talks with potential investors to buy a stake in its new digital platform. This is part of the Tata’s grand plan to modernize and digitize its consumer businesses.
In the last few years, the Tatas have seen the likes of Amazon, Flipkart and Reliance Digital create and monetize their digital businesses in a substantial manner. The new digital entity will consist of the combined digital assets of all the group companies of the Tata group.
It may be recollected that recently, Mukesh Ambani had managed to substantially enhance the value of the overall Reliance business by monetizing its digital and retail properties. In the last 1 year, digital has made the big difference to the valuation of Reliance Industries.
The Tatas may deploy this strategy to give greater visibility to the group and also to use the funds to reduce the debt. It is estimated that the debt of Tata Motors and Tata Steel combined stood at $21 billion.
While details are awaited, it is expected that the digital initiatives of most of the consumer facing brands of the Tata group like Tanishq gold stores, Titan watch showrooms, Star Bazaar, Taj Hotels, and Starbucks could all be combined into a single app.
With the Mistry stake likely to cost the Tatas nearly $20 billion, they need to look beyond monetizing TCS stock. This digital monetization will allow them to raise money without losing control over TCS holdings. The next few months could be interesting.