Tata Steel

They're a reflection of these companies' history.

50 years ago, Tata Motors needed to build a factory and Tata Steel had excess cash.

You know what the family did.

They owned both companies.

They weren't doing this.

It was an internal capital market.

But the accounting for it basically meant that Tata Steel now owned a piece of Tata Motors.

And the older you are as a company, the more you're going to accumulate these crossholdings.

You think, so what? When I come up with a value per share for Tata Chemicals, I feel a lot more shaky about that value than I do for Tata Consulting Services because so much of the value comes from this brown bag where I can't look inside the bag.

Now, why do you think Tata Consulting Services is less exposed to that than Tata Motors, Tata Steel, or Tata Chemicals? Probably

need some history.

What do you think it is? Did any of these companies, how did these companies get these crossholdings

So let's say Tata Motors wanted to build a new factory.

didn't have enough money.

Tata Steel did well that year.

Remember, the family owned both companies.

CSEP makes a direct comparison of the major cost heads between who they call Japan's largest steel producer and India's most profitable steel firm in FY 25.

Both were unnamed, but they're most likely Nippon Steel and Tata Steel respectively.

The per ton cost for the Indian firm was found to be lower by approximately 20 to 40%, and this is largely because Indian labor costs are a fraction of Japanese ones.

But additionally, the costs of logistics and coking coal have also narrowed over time with Japan.

India's steel sector has made real productivity gains since liberalization in the 1990s.

So when tariffs on steel were slashed after 1991, the prevailing wisdom was that cheaper foreign steel would overwhelm domestic producers.

But firms like Tata Steel responded with cost cutting and modernization measures.

By 2001, Tata Steel was ranked the world's number one steel company by World Steel Dynamics.

Remember, this is part of a family group of companies.

So I looked at Tata Steel, over-leveled.

Tata Chemicals, over-leveled.

And then I looked at Tata Consulting Services, which is their crown jewel.

And I'm going to make, and I can't prove this, but I'm going to make a statement that I think you need to think about with family groups.

Which is, in my view, here's what I think is happening.

Tata Motors, Tata Steel, Tata Chemicals are borrowing, in a sense, against Tata Consulting Services' debt capacity.

You think, that makes no sense.

Are you going to expand them? Are you going to contract them? What's your view on that?

So one good example there is, for example, Tata Steel in the Netherlands, a big steel plant in Europe, very important for the European steel production.

But they have a high energy consumption.

And of course, when you set up these big industrial complexes, you want to make sure that the energy is available all the time.

But because of these companies' history, they've accumulated crossholdings in each other.

So if you look at Tata Motors, you're going to see holdings from Tata Steel and Tata Chemicals and Tata Motors.

You're saying, so what? The family group can enforce its control, not just through its holdings in Tata Sons, but through the intra-group holdings.

The second is if you look at the boards of directors of these companies, you will notice there are independent directors that each company has, but there are also family group directors.

Second, I think the public companies need to be made independent standalone companies that they are on paper right now, but are not in practice.

That will require that each of these companies sell its cross holdings and other Tata companies.

Now, so that requires that Tata Motors get rid of its Tata Steel, Tata Chemical and whatever other Tata power holdings that it has and go back to being just Tata Motors.

And secondly, I think that the board of directors for each company has to have a single mission, which is to protect shareholders in that company.

Water use is low at an estimate of 0.1% of the national total.

And that's probably because Tata Steel is using 50% of all the water, I think.

Oh, yes.

Yeah.

Jamseti died in 1904.

But he also pioneered the Tata steel plant at Jamshedpur, which obviously now we know is named after him, Jamshedpur, and began three years after his death.

Here's an interesting bit about Jamshedji.

He had traveled to England in 1880.

But Ratan Tata was not in the best of positions to do so.

For one, there were veterans in the group who were pulling their respective companies in different directions.

There was Russi Modi of Tata Steel, Darbari Seth of Tata Chemicals, and Ajit Kerkar of Indian Hotels, who were used to running things the way they saw fit.

And they were not willing to listen to Ratan Tata.

We also need some clarity from the government about why it has an interdict against the firm, and what this means for the status of taxpayer funds already handed over.

The Lochaber agreement has faced sustained criticism since it was struck in 2016, as part of a back-to-back deal that saw the Scottish Government briefly take ownership of the Daliel and Clydebridge steel plants, buying them from Tata Steel for £1, before immediately selling them on to Mr Gupta's Liberty House for the same price.

It was negotiated in a matter of days during the pre-election period, with limited parliamentary scrutiny at the time.

The Scottish Government granted GFG's purchase of the Lochaber aluminium smelter and its associated hydropower stations from Rio Tinto, while GFG committed to buying electricity from the hydro scheme for 25 years.