Tata Sons, the holding company of the Tata Group, has taken a strategic decision to halt fresh investments in its digital and omni-channel businesses for the fiscal year 2024. This marks the first time in eight years that no new funds have been allocated to these ventures. The decision, as reported by people familiar with the matter, is aimed at rewiring strategy, enhancing accountability, and improving operational efficiencies to ensure profitable growth.
Financial Performance and Losses
According to Registrar of Companies (RoC) filings obtained through the business intelligence platform Tofler, Tata Digital, the holding company for the group’s ecommerce businesses, did not receive any equity infusion from Tata Sons in FY24. Tata Digital oversees several significant ecommerce entities, including Tata UniStore (which operates Tata Cliq), Innovative Retail Concepts (BigBasket), Tata 1MG Healthcare Solutions, and Infiniti Retail (owner of over 500 Croma stores). Additionally, it manages Tata Neu, a super app designed to integrate various services.
In FY23, the combined losses of Tata Digital and its major subsidiaries (Croma, Tata Cliq, and BigBasket) amounted to over ₹4,700 crore, up from ₹3,130 crore in FY22. Specific losses include Tata Digital’s standalone loss of ₹1,370 crore (a 23% increase), Infiniti Retail’s net loss of ₹957 crore (more than double), Tata Cliq’s loss of ₹874 crore (a 16% year-on-year increase), and Innovative Retail Concepts’ loss of ₹1,535 crore (an 89% rise).
Focus on Efficiency and Collaboration
Naveen Tahiliani, the new CEO of Tata Digital, has been tasked with revamping the operations. Tahiliani has implemented strict cost controls and is focusing on a data-driven approach to enhance operational efficiencies. There is a renewed emphasis on increasing collaboration among the various businesses to improve the overall consumer experience and make informed, data-centric decisions.
Future Investments and Fiscal Consolidation
Despite halting fresh investments, Tata Sons has emphasized that new fund infusions will commence once the strategic and organizational changes aimed at better operational efficiencies are in place. The group’s conservative investment approach in ecommerce until FY21 saw a significant shift, with substantial capital infusions in FY22 and FY23 to expand operations and cover increased operational costs.
Tata Sons’ top executives have highlighted the importance of setting deadlines for achieving profitable growth and ensuring businesses focus on effective execution on the ground. The lack of new spending is a move towards fiscal consolidation, pushing loss-making entities to turn a profit before further investments are made.
Regulatory Developments and Future Plans
In a significant development, the Reserve Bank of India granted Tata Payments a payment aggregator license earlier this year. Tata Payments, which operates a digital payments app, is held through Tata Digital and represents a key part of the group’s future plans to expand in the digital payments space.
As Tata Digital and its associated businesses work towards achieving profitability, the group’s strategic pause in investments underscores a disciplined approach to growth and sustainability in the rapidly evolving ecommerce sector.
