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[Music]
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Pravin, thank you so much for joining us
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today. Thanks for inviting me for this
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uh interview session. Great. Uh well,
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I'd love to talk to you about Tata
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Capital, of course, but before that uh
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uh I would love to know some of the
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background of your career in Tata
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Motors. Uh could you tell us a little
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bit about the turnaround of Tata Motors
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when you were there?
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I joined uh Tata Motors in the sense I
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was transferred from another Tata
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company end of 96
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and uh at that point of time Tata Motors
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uh was doing quite well but uh one was
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quite clear about the problems uh which
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were systemic problems related to the
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operations of Tata Motors especially
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with reference to the high cost
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operations. the market share was coming
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down. The product acceptability
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especially in the uh consumer in the car
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division were some problems. So it was
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quite clear that uh the company had to
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clean up its act as soon as possible. So
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starting from 99 onwards or maybe 2000
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onwards we started looking at the cost
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structure. We brought down our raw metal
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cost significantly. We improved our
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employee productivity signific
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significantly. We restructured our
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operations. Some of the non-performing
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assets or underperforming assets were
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either sold or were kind of a made to
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sweat a lot so that we could get better
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returns and I think the working capital
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management uh was one of the key areas
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where we did significant uh
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restructuring. We used to have uh huge
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amount of uh receivables problem,
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inventory problem and we used to have on
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the networking capital basis about close
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to 27% of our total revenue was blocked
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in networking capital not gross I'm
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talking about networking capital. So we
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decided to make the company get into
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some kind of a reverse mode in the sense
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from the positive networking capital
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where a lot of money was blocked. We
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thought that we should get into the
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negative networking capital. It took us
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about couple of years had to completely
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change the paradigm of uh the kind of a
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business we were into. The credit
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policies had to be changed. The
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inventory management policies had to be
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changed. We had to rework in terms of
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our policies with our vendors for the
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inventory management, the procurement
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system as well as for the payment terms.
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But finally we could succeed and today
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TA Motors is having uh net negative
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working capital for the last almost now
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close to 8 nine years and that has
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significantly reduced the dependence on
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the the kind of a working capital it
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required to engage and how did you
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change the paradigm?
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Uh let me give one example. We used to
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have 80% crate and 20% cash system when
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we used to sell our uh vehicles and uh
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we talked to our dealers. We provided
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them with the banking channel support
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system. We brought in a lot of IT
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systems and in all of that really helped
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and of course the mindset change mindset
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change amongst our own senior employees
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and also with the dealers and that
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really helped us in terms of shifting
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from 80% crate now we have got 100% cash
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there. Similarly with reference to the
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internal inventory management, we used
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to have huge amount of uh stocks from
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the point of view of managing our
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workflow or production flow more
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systematically. But we came to
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conclusion that basically we could have
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the same uh efficient production flow
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without unnecessarily holding the
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inventory at our end. And we had to
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better we had to have a better kind of a
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production planning process with our
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vendors. A good uh kind of a IT system
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through which we could continuously
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monitor the our own internal production
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requirement the flow from the vendors to
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us and with that we could uh bring down
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the inventory levels. So we used to have
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maybe about 90 or 100 days of inventory.
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We could bring it down to about maybe 30
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days or so. Similarly on the receivables
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we used to have about 90 days
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receivables. We brought them down to
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about 7 to 8 days. And of course we got
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uh by again using the new banking
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products we could bring down uh or get
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the extended uh payment schedule without
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impacting the cash flow for the vendors
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and in fact vendors started giving us
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the cash discount. So we use the banking
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channels very effectively and that uh
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improved our the payables in terms of
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number of days. So that's how we could
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manage the entire
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reverse position in terms of working
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capital. Was it the uh uh the fact that
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as a result of this uh strengthening of
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the company's financial situation that
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the strategic goal of expansion uh also
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came about uh specifically the uh the
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targeting of uh the Land Rover and the
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Jaguar acquisitions. Could you take us
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through some of your strategic thinking
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behind that? Yeah, actually after the uh
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turnaround that happened in year 2001
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and 2002, we looked at our own strategy
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and we there was very clear-cut strategy
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direction. One, of course, in the
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commercial vehicle business, we were one
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of the largest uh truck makers in the
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world, but we lacked technology in the
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high end of the truck manufacturing. And
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from that point of view, we thought
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maybe one option was to build it
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internally and the other option was to
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go for inorganic growth. And in 2003
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2004 we were uh successful in acquiring
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the Dewood truck company in South Korea.
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That helped us a lot in terms of uh kind
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of upgrading our technology in the
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high-end truck manufacturing the the
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heavy truck manufacturing.
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Thanks to that success then we looked at
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our car business and in car business we
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found that while we were very good in
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the low end of the I mean what I mean
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the small car manufacturing and small
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car technology we lacked the technology
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in the high end of the the luxur segment
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or the premier segment of car
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manufacturing. Now if we were to build
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it on our own in terms of this uh
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high-end or the premium segment uh
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technology it would have taken us a lot
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of time as well as a lot of money. So we
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got this opportunity in early 2007 or
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mid 2007 in terms of looking at Jaguar
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Land Rover which Ford Motor Company was
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looking at selling. I think we got the
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technology, the market, the product, the
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good people and the good technology
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facilities at a fairly good price and uh
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more importantly it helped us in terms
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of building our international market
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presence and more particularly in the
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premium segment vehicles and we also
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found that we could perhaps bring the
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lowcost manufacturing advantage from
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India to UK and bring down the overall
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cost without compromising on the
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quality. So that was the thinking
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process. So that now today if you look
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at it in the commercial vehicle
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manufacturing we are in the top five in
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the truck manufacturing and uh with
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covering the full technology right from
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the the uh small trucks to the top end
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trucks and if you look at the cars we
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have got our own nano which of course is
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a breakthrough technology and then we
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have got the premium segment vehicles
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through Jaguar Land Rover acquisition.
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So we are a full-fledged automo company
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both in the commercial vehicles as well
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as in the car segment. Your thinking
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about uh being able to bring lower costs
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into the high cost operations in the
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premium segment is very interesting. How
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has that been working out? I think we
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have already started working on both in
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the areas of uh bringing the component
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uh cost lower by having some of the
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component vendors from uh lowc cost
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countries to supply these components to
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the UK plant and more importantly also
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in the area of uh vehicle designing
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where we have inherent advantage with
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the software engineers that we have in
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Tata Motors and its own subsidiary
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company called Tata Tech. technologies.
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We have close to 4,000
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highclass uh software engineers who can
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develop right from a small component to
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the full uh vehicle design. So one can
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bring in that advantage of uh low cost
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without compromising on quality and the
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vehicle design component design as well
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as in terms of manufacturing. Now
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turning now to the nano uh uh can you
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tell us about what the current situation
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is and what your plans are? I mean I I
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hear a number of people asking when will
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the Nano be available in the US for
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example. Are we likely to see them being
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driven around Philadelphia anytime soon?
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I must say that Tata Motor certainly has
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got plans to bring nano to different
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parts of the world and uh I think US
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also will be one of its uh target areas
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or target market areas.
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Uh let's turn now to your your your
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present role which is uh in uh Tata
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Capital
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uh uh uh what what is the company's
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primary uh mission and and uh uh some of
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your key uh uh objectives?
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When the Tata group looked at its uh new
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growth strategy, it found that uh I
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think the financial services market is
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going to be one of the key growth areas
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in India. And uh Tatas used to have a
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very strong presence in the late 50s
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until late 50s and late60s before the
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either the bank or the insurance
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business which was either fully or
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partly owned by Tatas was nationalized.
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And we found that uh if we were to take
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the group into the new growth areas then
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a presence in the financial services
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would be the key requirement and from
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that point of view in 2007 we started
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Tata Capital also um India requires a
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huge amount of financial inclusion and
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therefore one can also get the social
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objective achieved without compromising
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on the commercial aspects of doing the
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business. So we uh started in 2007. We
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are in the areas of uh corporate finance
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business where we lend to the corporate
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clients mostly to the midsize and the
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smalls size companies which are today
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not getting the right kind of a grade
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from the banking system. Then we are
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also there in terms of investment
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banking uh where we again provide the
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same kind of a investment banking
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support to the midsize companies who
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again are not today getting the right
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kind of a financial advisory or
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investment banking advice. We are
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looking at capital market in a big way.
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Uh both in equity as well as in the debt
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market especially in the debt market
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where we feel that Indian uh capital
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Indian debt market uh needs to be
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strengthened or enhanced significantly.
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We are setting up private equity fund
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and uh the private equity fund is being
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set up from the point of view of helping
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some of these midsize companies which
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need this support in the form of private
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equity. Then of course from the
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financial inclusion point of view we are
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in the process of uh developing a very
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robust distribution and a broking
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network for distributing the financial
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products across the country. you are
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aware that the Tata name conotes a very
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strong uh kind of a image of trust and
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confidence and uh rural India or the
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semi- urban India believes or has got a
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very strong trust in the Tata name and
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therefore I think uh we should uh kind
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of a
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I would say use this uh strong trust in
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Tata name for the financial inclusion of
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in a commercial sense but at the same
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time achieving the social objective. So
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these are the four or five key areas in
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which uh Tara Group is working. Of
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course related to that we are also in
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the businesses of mortgage financing and
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auto financing and so on and so forth.
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Well uh so it's a very wide range of
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activities that you've just described.
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uh the financial services industry in
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India has become so competitive uh not
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just with domestic uh uh companies but
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also international players being so
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active in the area of private equity and
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so forth. Uh what is your uh positioning
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in terms of uh setting out a unique
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strategy to differentiate what you do
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from the rest of the market? Uh you're
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right actually unfortunately the Indian
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uh regulations today don't allow the
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large corporates like Tatas to get into
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full-fledged banking or commercial
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banking. So we are registered as a
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non-banking financial services company
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which uh doesn't allow us to get access
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to the low cost current account and
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savings account of the retail consumers.
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So we certainly have a cost disadvantage
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on the funding side. But what we are
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trying to do is we are keeping your
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operations very costefficient by using
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the technology by using uh highly uh
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motivated employees so that you can have
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much better employee productivity the
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right kind of a processes in place. We
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also are looking at how best we can
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acquire the top quality kind of a
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acquisition of businesses or customers
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and in the process keep the NPA lower.
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So I think uh the emphasis is in terms
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of keeping the cost low and productivity
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very high and I think uh the other thing
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which we are looking at if you grow the
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business reasonably well you will also
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have the ability to kind of access the
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funds at a relatively lower cost
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certainly not at the same cost like a
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commercial bank would access but still
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at the same time try to access at a
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relatively lower cost to some extent we
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have succeeded. The other point I would
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like to make is that the we are a 100%
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subsidiary of Tatasans the holding
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company of the group and the group has
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capitalized the company quite well right
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from the beginning that also helps us in
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terms of having a very high grade rating
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and allowing us to access the relatively
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lowc cost funds. What kind of
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opportunities do you see in the rural
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Indian market?
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I think um there is huge amount of uh
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potential in the rural and semi- urban
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market. If you really look at rural
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India, most of the savings and I must
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say that the savings rate in India is
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very high as you know more than 34%. But
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in the rural and semi- urban markets the
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savings are kind of a invested in gold
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or in uh which again is not it's a kind
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of illquid asset or in land again which
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is not giving them the right kind of a
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return or in the worst or in the best
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case situation maybe in a fixed deposit
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with a cooperative bank. So rural India
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is not exposed to many of the high
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return kind of a financial products like
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equities or mutual funds or even
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insurance which can take care of uh the
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risk part also. I think uh this is where
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the company like Tata Capital which has
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got a strong name a strong distribution
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network can play an important role in
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terms of educating the rural India in
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terms of converting some of these
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non-productive or illquid assets or low
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income yielding kind of assets into I
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would say relatively higher income
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yielding assets in terms of also which
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will also give them better liquidity and
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better return. So that's the role we are
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trying to play. It's a long haul. It's
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not going to be this objective is not
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going to be achieved overnight. You need
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to have a song long sustainance or
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sustaining kind of ability. Uh so which
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is what we are ready to do. I mean Tatas
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don't do business only for few years. We
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are here to play a long time kind of a
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role. But I believe that uh Tata Capital
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and the Tata Group can really play an
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important role in financial inclusion by
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bringing rural India and semi-urban
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India into kind of a network of these
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financial products. I'd like to end
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Prairie if you don't mind with a couple
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of personal questions. In the course of
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your own experience, what would you say
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has been the biggest leadership
00:17:32
challenge you have faced in your career
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and how did you overcome it and what did
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you learn from it?
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It's a difficult question. And I don't
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know in terms of leadership challenge uh
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um
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I I I must say that I I I worked as a
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CFO all along and now I'm a CEO and uh
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CFO is always supposed to be a kind of a
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critic of
00:18:02
what should I say the company's
00:18:04
financial health and trying to help the
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company uh in terms of improving its
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financial health. Now I'm a CEO. As a
00:18:13
CEO, you are now actually supposed to
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set the whole uh kind of a game plan in
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terms of uh a having a growth at the
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same time having a sound financial
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health and sound kind of a uh processes
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and all that. So from being a bean
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counter now actually somebody who is
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executing that I think is a key
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challenge. Well, you're actually
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producing the beans, not just counting
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them. One last question. How do you
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define success?
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I think success again it's a relative
00:18:50
term. Uh if you were to ask me a
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question as to how can we call Tata
00:18:55
Capital as a successful company. If
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you're asking me from the company's
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point of view, I think if we can uh
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achieve our objectives of being in the
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top three or four
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the top financial services company in
00:19:12
India and maybe in the next 10 years it
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would be I can say then we have achieved
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something which can be called as
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something sign of significance. And for
00:19:21
you personally
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I think personally uh it's a great
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challenge. which I have been asked to
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set up something from almost ground zero
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and if I can achieve that creating a
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very successful financial services
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business for the group I would say that
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it will be I'll be very happy if I
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achieve that provin thank you so much
00:19:42
for joining us today thank you
