CEOInterviews.AINatarajan Chandrasekaran Exclusive Interview | CNBC TV18

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Interviewer0:00

Please subscribe and don't forget to press the bell icon to get notified whenever we upload a new video. You would ideally like to rationalize, you've still got a fairly complicated group structure which you would like to simplify even further. At the start of 2018, and as we look at a new financial year, what is the vision that you have for the group?

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Natarajan Chandrasekaran0:28

That's a big question. I think if you look at the group, the biggest strength we have is the brand. We are present in a hundred companies, but primarily they follow a pattern. If you look at all the companies, you can classify them into at least eight different industries. There are three big companies that form their own vertical: Tata Steel, Tata Motors, and TCS. The remaining companies fall into financial services, infrastructure, consumer and retail, and so on. We are trying to see how we can bring all these companies together and drive simplification, synergy, and scale.

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Interviewer1:34

You just articulated for us broadly the buckets that you envisage the group taking forward. You've already started the process of bringing together the disparate entities within a similar vertical, for the defense business. How soon can we expect you to move on the other pieces and create these vertical clusters?

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Natarajan Chandrasekaran2:01

We are moving on each of these verticals as we speak. In some verticals it's easy because all the companies understand; in others it's difficult because there are listed and unlisted companies. Overall, there are about 32 holding companies, and we need to consolidate or synergize between them. This process is ongoing, not one after another, but working on all dimensions simultaneously.

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Interviewer2:43

So moving in parallel across all of these, and you're looking at 32 holding companies. If I may talk to you about some new opportunities, especially in spaces that the Tatas have traditionally operated in. I'll start with Air India. The government has put out the information memorandum. Will you consider bidding for Air India?

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Natarajan Chandrasekaran3:15

I think you've tried this multiple times. The deadline for sending inquiries to the government expires on the 16th of April.

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Interviewer3:37

Have you sent in your queries to the government on Air India?

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Natarajan Chandrasekaran3:41

I don't want to answer this in the media.

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Interviewer3:45

Let me rephrase. Whether you choose to bid or not is a different story, but given that you already have two aviation companies in India—Vistara and AirAsia India—would it be of interest to consider another airline? It's a low-multiple business. Do you really want to continue in another low-multiple business?

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Natarajan Chandrasekaran4:09

I think you're giving a lot of answers to me. Do I make sense? I make a lot of sense. So does that mean a low-multiple business may not necessarily be a good business? The fact is, we are already in two different airlines. Adding one more, however attractive or unattractive or complicated, is a question we need to think through. There are many factors to consider. All your questions are valid.

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Interviewer4:50

I think that is the most I will get out of you as far as Air India is concerned. Let me talk to you about another issue: cleaning up balance sheets across the group. How confident do you feel that the balance sheet repair process will be completed this financial year, moving towards stronger cash flows next year?

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Natarajan Chandrasekaran5:13

The biggest one was Tata Teleservices. We are going through that process, and that transaction has to conclude, hopefully this year. For Tata Steel, we have found a solution in the form of a joint venture in Europe. That transaction is in the works. Once done, some debt will go away. We are focused on expanding Tata Steel in India, aiming to double capacity. There are issues with Tata Motors, but that company is addressing them. I must say we will be significantly better by the end of this year.

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Interviewer6:27

Let me pick up on each of those points. On Tata Steel, yesterday we heard from ThyssenKrupp saying they feel confident of concluding the joint venture in the first half of the year. Is everything on track? And on the India opportunity, you've looked at stressed assets like Bhushan Steel. How is the steel business looking in India today?

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Natarajan Chandrasekaran7:12

On the ThyssenKrupp joint venture, we are progressing and on track. There are many steps, but we are confident we will conclude as per timelines. For the India steel business, it's a very attractive market with huge expansion opportunities. India's capacity can double or triple. We have taken a call to do organic expansion at our plant in Kalinganagar of five million tons, and we've gone for a couple of assets. That will keep our doubling plan on track. Regarding competition, you need to do another interview. These are all existing capacities, so whoever wins doesn't matter.

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Interviewer8:44

Why did you not show any interest in Essar Steel?

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Natarajan Chandrasekaran8:47

We have our hands full with the transactions I've talked about. It's not only financial but also in terms of execution. Our hands will be full for the time being.

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Interviewer9:08

The other two businesses that drive growth: Tata Motors and TCS. Let me start with TCS, a company you lived and breathed. Are you enjoying the fact that you don't have to deliver quarterly numbers? And what is the external environment for Indian IT today, with the world reacting to every tweet from President Trump? What is the outlook for Indian IT?

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Natarajan Chandrasekaran10:03

I enjoyed my job every single day for the last 30 years, and I enjoy my current job. Regarding the IT industry, it's a great industry with enormous growth. TCS has made investments to operate in the new world of AI, analytics, machine learning, deep learning, and IoT. Every company has to reinvent itself, and you can see TCS's order book. I believe the Indian IT growth story will continue.

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Interviewer11:09

You believe the Indian growth story will continue for IT? Regulatory changes happen, that's a cost of doing business. But what is fundamentally changing for the Indian IT services model? With offshore, nearshore, visa restrictions, do you believe the era of 20% plus margins will continue? What are the big shifts from a business model perspective?

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Natarajan Chandrasekaran12:20

You