News: Tatas will venture into uncharted waters

(DNA 18/05/2006) Mumbai - The Tata group, the country’s largest private sector business house, is planning an entry into the maritime shipping business.

The move comes at a time when the Tatas are rapidly globalising their businesses.

"We are trying to get a control over logistics and it includes the shipping business," said T Mukherjee, deputy managing director-steel, Tata Steel, said.

TM International Logistics (TMIL), a 51:49 joint venture between Tata Steel and IQ Matrade, a German company runs berth No. 12 at Haldia.

It has chartering, freight forwarding, shipping and clearing businesses. The subsidiary has increased its turnover by about 60% year on year for a few years and caters to other groups such as PSU major the Steel Authority of India.

While Tata Steel would be one of the major drivers to push the group to enter the maritime business, the blue print is being prepared by the think tank in Tata Sons, the main holding company for the group.

"We look at several opportunities. Shipping is a business that we are keen to enter but the entire plan is still being evolved. We throw many ideas into the fire. Finally it depends on what comes out baked," said A N Singh, deputy managing director-corporate services, Tata Steel.

On being asked about the logic to enter a new arena for a business house which so far stuck to the knitting in terms of the businesses it has been in, senior officials riposted that the group has been flexible on this aspect. "Look we have strongly got into telecom which a decade ago was never in our bloodstream," an official said.

It makes sound logic for the group. Tata Steel, the country’s largest private sector steel company shaved off expenses in logistics by 2%, at a time when freight rates were scaling up due to skyrocketing fuel prices and strict laws on trucks carrying loads. "We are not going to remain a 9 million tonne steel company for long," said Mukherjee in a different context on Thursday.

For Tata Steel it makes eminent sense to have its own shipping company with freighters ferrying coal from Australia and iron billets from Iran to its Natsteel plants in South East Asia and Tata Steel’s Indian operations ferrying steel to markets in Europe and USA.

But it’s not Tata Steel alone that could benefit from the group’s foray into Steel Tata Chemicals imports a lot of raw materials for its fertiliser business and also exports soda ash from India and Africa. It also has plans to venture in a big way into Bangladesh and already has ambitious plans in South Africa.

Analysts say that the strategy is not new. Gujarat Ambuja is one of the few Indian companies that uses its own fleet of ships to export cement and import coal. Other companies like India Cement and century Textiles have done badly when it diversified into shipping.

But for the Tatas this is clearly a new line. Having secured a rich past before when it pioneered civil aviation in the country floating Air India which was subsequently nationalised by the government, sea navigation would be a new business venture.