TATA GROUP CASE STUDY

TATA GROUP

Think that you are sitting by the seaside one day, And the salty water of the sea comes to your feet, and then you have an idea Why don't I take out this salt and sell it all over India? You need a small manufacturing unit to do this. But, regret Due to lack of funds for expansion You have to sell your manufacturing unit to a businessman but after a few years to the same company that you sold That businessman turns It Into Asia's Largest Salt Manufacturing company And you're still part of that company This is the story of TATA Chemicals The Tata group company that no one talks about and people don't even know that This company has paid all its investors in the last 10 years Has given returns of more than 400% And interestingly, Inside this Tata group company Some such secrets of Tata group are hidden what most people don't even know that The question is, what is that secret? And what is the Tata group doing inside out? What most people don't even know And most importantly, what powerful business lessons are That we learned from this case study We can implement in our life and our investment journey. 

The story begins in 1920 When Mr. Kapil Dev Vakil, a chemical engineer After finishing his studies in England, he comes back to Gujarat. India's biggest coastline is in Gujarat, Looking at the thing, He explores the possibilities of extracting salt from the sea. They also needed a lot of money to do this thing And also permission for manufacturing, Some time passes After which the Prince Sayaji Rao Gaekwad of Baroda gives him permission to allow this thing, and finally in 1927, Vakil, Opens the okra Salt Works 10 years pass, now it was time to expand the unit But, regret Vakil did not have enough money to expand this business unit And as a result, He goes to meet a businessman in 1939 A deal happens and their company is sold And Vakil is appointed as a director within the same company But do you know who was that businessman? Well, he was none other than Mr. J.R.D. TATA Many difficulties came and passed everything And in just a few years, by 1944, the company had reached a production cap. of 80 tons per day. and who knew, That Tata Chemicals used to produce only 80 tons per day in the coming years. It would reach a capacity of over 400 tons by 1962 today Tata Chemicals manufactures more than 25,000 tons of salts every day. Which makes it the largest salt manufacturer in Asia But that's just one side of the story: Today Tata Chemicals And in fact many Tata companies are doing something like this. what most people don't even know And this thing is very powerful too: But at the same time this thing is also very risky: But the question is: what is that thing after all? To understand this, you need to understand these 3 things about Tata Chemicals. No.1, How Tata Chemicals' Manufacturing Structure Works No.2, What is so unique about Tata Chemicals' revenue model!! Which gives them a very powerful strategic advantage And No.3, and most importantly, How does the Tata Chemicals portfolio model work? So first of all, what is the manufacturing model of Tata Chemicals, And how it works? In simple words, Tata Chemicals is completely based on chemistry And Tata Chemicals works on these 2 verticals of chemistry No.1, Basic Chemistry, No.2, Specialty Chemistry Under Basic Chemistry, Tata Chemicals mainly operates under these 4 things No.1, Salt Manufacturing Till date we all feel that we all buy Tata salt from the market. That Tata Consumer Goods Ltd. This one company makes but it's not like that, Tata Consumer Goods Ltd. is a subsidiary of Tata Chemicals. through the subsidiary Tata Chemicals All its salt products And brings the rest of the edible products into the market Another thing is Soda Ash Which is raw material: a lot of things to manufacture Like Glass, Detergent, Pharmaceuticals, Bakery items Soda ash is used in all these things. The third thing is halogens, which contain chemicals such as chlorine and bromine That's a lot of Industries also use them. And apart from this, These chemicals are also used in many science labs. And Fourth: Salt Products Inside which Tata Chemicals deals in these 3 different types of salt products. No.1, Livestock Salt No.2, Industrial Salt, And No.3, Gypsum This is the basic chemistry vertical of Tata Chemicals But it is the specialty chemical vertical of Tata Chemicals He is actually responsible for controlling our entire economy in some way. I'll tell you how, Tata Chemical's specialty vertical mainly controls these 2 things No.1, Nutrition Science And No.2, Crop Protection And both of those who are clients of these verticals, Those are Businesses To Business Clients That means a lot of businesses From crop protection to nutrition science, Tata Chemicals is highly dependent on both. And very few people know this Not only in our country but also in worldwide many of these industries Like Performance Tyres, Cosmetics,  Pharmaceuticals, Oralcare, Paint, Rubber Only the raw material of Tata Chemicals go inside these industries But what is most important for our country, That is crop protection. Rallis India Limited is a company engaged in crop protection. The company which is controlled by Tata Chemicals over 50% of its stack Rallis India Limited Inside the entire country Responsible for crop protection within more than 80% of districts So by any chance, If anything bad happens to this company So whole India will be in danger and along with that, At present, Tata Chemicals has 2 such powerful weapons, Which is not with any other chemical company The first weapon is Soda Ash. I know what you're thinking Why Soda Ash Is So Important, what happens to that? Well, Look at this very very carefully Glass, Detergent, Soap, Food, Cosmetics and Pharmaceuticals None of these things can be made without soda ash Because inside the manufacturing of all these things Soda ash is the primary raw material, And moreover, All the companies in this world that manufacture this these things, It is highly dependent on Tata Chemicals in some way or the other And the second and most powerful weapon of Tata Chemicals is Manufacturing of Lithium-ion cell Which will be inside making it the batteries of the electric vehicle Give a small idea Tata group is a multi-dimensional conglomerate So you don't know which Tata group company will perform well No one knows whether Tata Motors will grow or Tata Steel Will Tata Chemicals Grow or Tata Consumer Goods?  Soda Ash or Lithium Ion Cell manufacturing These 2 very powerful weapons from Tata Chemicals Gives such a strategic advantage to Tata Chemicals At this time no other business group has that strategic advantage The name of the advantage is EV Horizontal Integration To understand this revolutionary EV horizontal integration of the Tata Group It is very important for us to understand these 2 things No.1, what is the revenue model of Tata Chemicals? & No.2, How Does Tata Chemicals Portfolio Model works? So if we look at the revenue models of Tata Chemicals So the majority of the revenue of Tata Chemicals comes from these 2 things No.1, Soda Ash & No.2, Crop Protection More than 50% of Tata Chemicals' revenue comes from soda ash only And 18.5% of Tata Chemicals' revenue comes from crop protection which she controls through the Rallis India business So in simple words, As the business of Rallis Crop Protection India will flourish, By the way, the worth of Tata Chemicals will also go up. But the soda ash business of Tata Chemicals gives Tata Chemicals such a strategic advantage Which is not currently with any other chemical business So now look at this very very carefully Tata Chemicals controls the supply of more than 70% of the soda ash produced in the world Moreover, All the soda ash manufacturing plants of Tata Chemicals source their raw material only through natural sources. I know what you're thinking How is this thing possible after all? The answer to this thing is hidden, inside the Tata Chemicals plant location. If we look carefully at the location of the International Plant of Tata Chemicals The US Plant of Tata Chemicals is inside Wyoming Where are the world's largest deposits of Trona. The same goes for Kenya, The Kenya plant of Tata Chemicals is near Magadi Lake. And Magadi Lake is a regenerating lake But if we talk about Tata Chemicals UK's plant, Which is the plant of Tata Chemicals in the UK, There the availability of natural salt is already very high. And if we come back to India, The Mithapur plant of Tata Chemicals inside India, That plant does all the production only solar heat. Because that plant is above such a location Where there is so much light the whole plant can run on solar energy only. If we understand this thing very deeply So the plants of Tata Chemicals, Have such a location strategic advantage. Due to this, the cost of their raw material is very less. And moreover, Because their plants are set in such places where natural resources and reserves are very much present. Due to this, today Tata Chemicals Controls the manufacturing of More than 70% of the world's soda ash most importantly, Soda ash is one such element, Which is used in most industries as a raw material. Because of that, Most companies depend on Tata Chemicals for their raw material But there is one more thing that makes Tata Chemicals very powerful. And that is the portfolio model of Tata Chemicals Tata Sons, the holding company of Tata Group If we analyze its holding patterns very closely, So 2.5% of that comes from Tata Chemicals That is, the net worth of Tata Sons is 20,000 crores, Comes only and only from Tata Chemicals Company But that's a very interesting thing, A flagship company of Tata Sons Tata Chemicals Zone 1.56% stack of Titan Industries So, intern If Titan Industry Performs Very Well The worth of Tata Chemicals will increase automatically That is, due to the strong holding of Tata Chemicals, Not only does Titan Industries benefit, But the overall Tata Group also has a huge advantage. Because Titan Industries will perform well once But the ripple effect it has will be visible on Tata Chemicals As well as on the overall group But still, The Tata Group is currently using Tata Chemicals To strengthen something That will take the Tata Group to the next level. And that is EV Horizontal Integration In very simple words, Tata Groups is building a complete ecosystem of Electric Vehicles So, now look at this very very carefully These Are the 3 Major Important Players in the EV Ecosystem of Tata Groups No.1, Tata Chemicals Whose job is to manufacture lithium-ion cells No.2, Tata Motors is currently working on EV vehicles But EV vehicles run on EV batteries And the most important element for making EV batteries is Lithium Ion cells. Which will be made by Tata Chemicals only And 3rd and most importantly, Tata power Which is currently setting up Tata's EV charging infrastructure. And even today, These people have set up their infrastructure in more than 40 cities. Due to this, there is a very high chance that in the coming time, Tata Group may do this thing. Since Tata Group already owns have their Tata Chemicals So it is easier for them to manufacture the EV batteries Because Lithium Ion cells are already made their Tata Chemicals Due to which the prices of their EVs is Their electric vehicles can be launched inside the market very cheaply. Due to this Most of the people in the country will be able to afford them. And then Tata Group, Will earn a premium through its charging infrastructure To all the people to whom they sold the vehicles. Through this complete horizontal integration, Tata Group is creating such an ecosystem. Inside which there is an entry barrier in the electronics vehicle, it will be reduced for the people. The thing that will enable a lot of people to afford EV vehicles And by charging a very high premium through its charging stations Tata Group will also be able to maintain profitability Even if, It is selling all its electronic vehicles at a very cheap price. Because of that, They will not only have recurring revenue But the overall growth of Tata Group will also reach the next level. Who brings us to the most important thing What are the powerful business lessons that we can learn from this case study and apply in our business and investment journey? The first lesson, Don't just to look at what the company is doing, But also to look at how they are doing it. Just focusing on what the company is doing doesn't matter Rather it is very important to know how she is doing that thing. If we look at the business of Tata Chemicals from above We will only see that this company only manufactures. Soda, Ash, and Salt. But how is he doing this thing, That thing provides such a strategic advantage to these companies Due to this today most of the companies in this world are dependent on Tata Chemicals for soda ash. So as investors Pay attention not only to the work of the company But also to the way they work Due to which you can take such a smart investment decision which can earn you very good returns in the coming time. 2nd lesson, Understand the group Dynamics TATA, Birla, Ambani, Adani In all these business houses of our country There is one thing common and that thing is Business Integration. If only talk about the business integration of Adani Group So he is so powerful That he can change the future of the country in the coming time If you are investing in which business group or any company, Then not only that company but the rest of the companies in that business group. And it is very important to analyze the linkage between that companies as well. Because maybe that company as an Individual is not performing very well But the rest of the companies inside the group. that company can have such a strong linkage Which, in the coming time, will bring not only that company but also the entire group to the next level.