Is the Tata Group paying the price for being truly multinational

The New Year should mark a period of inward reflection for one of India's truly global conglomerates - the Tata Group.What is common between Walmart, Apple, Google, General Electric, Volkswagen, HSBC and the Tata Group These are all highly successful profitable companies or conglomerates that have branched out from their home countries to almost every corner of the world.Sceptics may scoff at the mention of Tata Group in the same line as the other global stalwarts. Tata maybe a household name in India but a Walmart or an Apple are much bigger in size and more globally renowned. At the same time, while these are individual companies, or in the case of Toyota and Volkswagen a conjugation of not more than a dozen companies at best, the Tata Group comprises of over 100 companies, 29 of them listed at the Bombay Stock Exchange (BSE).Yet, Tata deserves to be in that group. Its combined revenues of $103.51 billion pales in comparison to Walmart's $482 billion, Volkswagen's $237 billion or Apple's $234 billion but like any individual, a company or a conglomerate is also a product of its times. The US economy of $17.9 trillion (GDP) is almost nine times that of India, while Germany, the most resilient economy in Europe, is twice the size. In that context, the Tata Group matters more to the Indian economy than any of these companies to theirs.Through a series of acquisitions in the last decade and a half, with varying degrees of success, the Tata Group is also sufficiently spread out globally. Its revenues from overseas has grown rapidly in the last 10 years and now accounts for 67 per cent of its overall revenue against just 32 per cent in 2005-06. In fact, its two biggest acquisitions - Tata Steel's Corus in 2007 and Tata Motor's Jaguar Land Rover (JLR) the following year - makes it the biggest employer in the British economy. An Indian company having a say in the destiny of a country that colonised us for 200 years sure makes us feel proud.Not everything though is right about the group as things stand today. In an uncertain global economy and Tata's overt reliance on a few of its group companies makes it very vulnerable. Its dependence on TCS - India's largest IT company is particularly glaring. With a market capitalisation of Rs 430,834 crores, it accounts for nearly 60 per cent of the group's overall market cap. In other words, the health of the group as a whole is the responsibility of just one of its companies to continue to perform well.At the same time not all of Tata's acquisitions in the past have delivered the desired results and the intangible web of cross holdings that is a singular feature of the group puts the burden of a dodgy acquisition on a host of its companies. The acquisition of Corus at elevated valuations in 2007 was so perplexing that it came as no surprise when the company decided to get rid of all its UK assets earlier this year. All this while besides the principal amount that was paid for the acquisition alone, Tata also pumped in crores into its European operations hoping for a turnaround that never happened. A similar strategy has worked remarkably well at Jaguar Land Rover but its low valuation - JLR cost barely a sixth of Corus to Tata - means the mistake was more costly than the jackpot.Besides, Corus was not the only bad bargain. Most of the acquisitions carried out by Indian Hotels that runs a range of luxury hotels in India and abroad under the brand name Taj, have been failures. Barely a few months before the Corus acquisition, Indian Hotels had acquired the upscale Ritz Carlton hotel in Boston for $170 million. Hospitality is a demanding business and despite Tata's best efforts, Taj Boston, as the hotel was later rechristened, could not prosper. The company sold the property earlier this year to United Overseas Holdings for $125 million, taking a hit of Rs 103.07 crores on account of that. Only two years ago it had also sold its loss making Blue Sydney hotel in Australia as well. The company's other acquisitions in the US - Pierre in New York and Campton Place in San Francisco - do not help either. With outstanding debt of Rs 5,000 crores [$750mn], the company has posted a net loss in each of its last four years. Its international business has contributed heavily towards that.While the acquisitions look ill-conceived and should have been avoided, hindsight is a useful tool that does not help. However, the more pressing and fundamental problem is of diversification of profits and revenues across the companies. It sounds great to have your presence marked across six continents and 100 countries but if that is on the back of just a handful of diligent firms, then you are asking for trouble. To become global is one thing but to stay there, every company has to go through a process of transformation and course correction from time to time.The Tata Group has achieved more breadth and flab than it could have hoped for in this millennium. Now is the time to look inward and mend some of the cracks that are a result of this overzealous foreign expansion.