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Coronavirus impact: Tata Sons tells group companies to halt capex plans, conserve cash

Tata Sons which is the holding firm of the Tata Group has asked CEOs of its companies to keep capex plans on hold which will ensure sufficient liquidity in these tough times

twitter-logoBusinessToday.In | April 10, 2020 | Updated 11:56 IST
N Chandrasekaran, chairman of Tata Sons
Tata Sons chairman N Chandrasekaran

Tata Sons has carried out an extensive review of its group firms as businesses take a severe hit from coronavirus pandemic which has brought the global economy on its knees. Tata Sons which is the holding firm of the Tata Group has asked CEOs of its companies to keep capex plans on hold which will ensure sufficient liquidity in these tough times.

"Conserving cash for 2020-21 is our message to all group companies," N Chandrasekaran, chairman of Tata Sons, told The Economic Times.

Tata Sons has asked group CEOs to carry out collaboration in businesses and undertake digitalisation as  a top priority.

"Every country is at a standstill as far as jobs are concerned, and GDP everywhere will be hit. In India, a huge shrinkage of GDP, of around $250 billion, is expected. We need to quickly get the economy back on track post the crisis to address it," Chandrasekaran said.

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Since transactions are not taking place, several industries, especially SMEs and microenterpreneurs would need external support to survive, he said.

There is special need to revive sectors such as construction, automobile and logistics to ensure that people return to work. "Liquidity and timely stimulus are critical, through maybe interest-free loans or moratorium, along with food security to get our economy back to growth quickly," he said.

"The biggest challenge is the uncertainty about how long will this health crisis last. Essentials like consumer and retail will come back but to get people back to work, some stimulus is required," Chandrasekaran said.

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Commenting on the strategy how group companies such as Vistara and Indian Hotels will react to the impact on revenues due to the pandemic, the Tata Sons chief said it was up to individual firms to ensure that their business was viable. "Tata Sons will only do the scenario planning, ultimately we are also a shareholder. Each company will review its HR policy, revenue planning and ways to manage cashflows. We will be compassionate and each company will take a decision individually to ensure a viable business."

Group firms have been directed to alter annual plans since revenues are seen taking a big hit due to the ongoing crisis. In a heart-warming gesture, Tata Group had said it would continue to pay temporary workers for the duration they had not been working. "We have made a commitment to the 100 million bottom of the pyramid workers," Chandrasekaran said.

The group chairman said tough decisions would be taken in terms of portfolio restructuring, which was aimed to ensure a mix of growth and cash businesses.

"The portfolio restructuring plan will in fact be accelerated. We have already lost valuable time and what is not sustainable will be reviewed and some businesses may be restructured to have a digital face," he said. "While addressing the issue of portfolio restructuring, tough decisions and calls will have to be taken and that will have people implications," he said. "As a group we will be compassionate and always handle the people issues with fairness."

Tata Group which has been producing ventilators to help the government fight the coronavirus crisis will also start making other medical devices.

"We always had a plan but now the seed for our medical venture business too has been sowed," he said.

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The Tata Group has already been collaborating to procure personal protective equipment (PPEs), make masks and sanitisers and disinfectants.

On the automobile sector, Chandrasekaran said the passenger car and the commercial vehicle market had already hit the bottom even before coronavrus crisis started.

"These sectors can now come back faster having hit a low. A little push with stimulus can help these sectors revive and get many people back to work which is critical for the economy to revive," he said.

On worries over global businesses like Tata Steel Europe and JLR, Chandrasekaran said they would be addressed by the global entities. "Every government has offered to help and protect industries and jobs. So we all are going through the processes and hoping for timely intervention by respective governments to save jobs," he added.

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