What's In Store For TATA Technologies?
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00:00Well, Warren Harris, MD and CEO of Tata Technologies now joins in to talk to us about what business
00:05is and what the key triggers for the company are.
00:08Hi, Warren.
00:09Good morning.
00:10Thanks for joining us.
00:11Warren, you are in an industry which has that much-needed momentum but still grapples with
00:17volatility.
00:18How are you coping?
00:19Is the outlook looking better today than it did, say, in the early part of this year or
00:24are things tough?
00:25Sure.
00:26Sure.
00:28Sure.
00:29Yeah.
00:30As far as the momentum in the industry is concerned, we're not seeing any tapering of
00:38demand.
00:39You know, I think there has been a slowdown in EV sales but we're in the business of investing
00:49with our customers in future products and certainly demand continues to build.
00:56So we're excited about the direction that the industry is taking.
01:00We're excited about the contribution that we're making.
01:04And the biggest challenge that we've got at the moment is capability and skills and that's
01:09why we're investing all over the world and specifically in India.
01:13Interesting, Warren.
01:14So you have supply-side concerns while demand is looking very robust at the current times.
01:20Is that what you mean?
01:24No, the demand, I think, is very robust.
01:28Despite the fact that growth in EV sales has started to plateau, the growth is still very
01:36much there.
01:37There was 14 million units that were sold last year.
01:40This year, the industry, despite the headwinds in places like the US and certain parts of
01:47Europe, is still expecting to sell some 17 million units of electric vehicles.
01:56And so that translates into almost one in five vehicles that are sold today will have
02:04some form of electrification.
02:07And if you project to the mid-2030s, we expect that to transition to about one in two vehicles
02:16sold will have some form of electrification.
02:18So the industry is very much pivoting, not just to electrification, but also investments
02:27in software-defined vehicles and in autonomy.
02:32And that continues to provide tailwinds for organizations like ourselves.
02:38The big challenge that I think we're all grappling with right now is the availability of relevant
02:43skills.
02:45And so we are investing ourselves in building the type of capability that the industry is
02:49going to be needing.
02:50Interesting.
02:51Warren, how are you placed as compared to your global peers?
02:55I know you have your strengths, but there are players who've been around maybe longer
02:59than at Tata Tech.
03:00And then there is, of course, a geographical bias, too.
03:03How do you deal with increased competition and geographical sort of biases?
03:09Well, if you look at our EV journey, it began in 2010.
03:14Mr. Tata challenged us to put together an electric vehicle technology demonstrator that
03:20was as frugal from a pricing perspective as the Tata Nano.
03:25And we revealed that vehicle at the International Automotive Show in Detroit in 2012.
03:33And that was the same show that Elon Musk revealed the Model S.
03:38So we've been part of the EV journey almost since the outset.
03:42And we partnered not only with group companies like Tata Motors and JLR, but also progressive
03:50organizations like NIO in China, Polestar in Scandinavia.
03:55And we've recently, as many people will know, have helped WinFast launch the two SUVs that
04:03we took turnkey responsibility for.
04:06So, you know, although we are very proud of our heritage in India and the nexus and capabilities
04:12that we have there, we're very much a global company.
04:17And we have sites and teams that are very close to our customers in different parts
04:25of the world.
04:26And I think that footprint, that coverage model, combined with the experience that we've
04:32built out now over the last 14, 15 years, I think is really informing the type of confidence
04:40that our customers are extending in us.
04:42One of the easiest ways to scale up and since you have supply side concerns is acquisitions
04:48locally or globally.
04:50You know, one may argue that the better way to do this is either organic or through partnerships
04:55which you've committed to recently.
04:57Do you think that you're eyeing to build up your supply side quickly?
05:05I think we're open to both organic growth as well as targeted acquisitions when they
05:14make sense.
05:15If you look at the history of the company, the history of the company has been informed
05:21by three relatively large acquisitions.
05:25There was the acquisition in 2005 of the company that I was a part of, Incare International.
05:31And we followed that up with investments in a company called Cambric in 2012 and a company
05:38called Ascenda in 2017, 2018.
05:42So the organization has demonstrated its appetite for acquisitions when it's made sense.
05:50We've typically done that thoughtfully and we've focused as much on capability and customer
06:00acquisition as well as the cultural alignment between ourselves and the organizations that
06:06we've brought in.
06:07So we're very much open to complementing the investments that we make organically with
06:13acquisitions when they make sense.
06:15There's no better time than now for it to make sense, right?
06:19And I'd imagine that you would be eyeing a company, there is conversations underway.
06:23Give us clarity because the environment, like you've mentioned yourself, is very robust.
06:30And you're absolutely right.
06:31I think the fact that we're now a public company, we have a balance sheet that is debt-free.
06:38We have a very healthy cash position on that balance sheet.
06:42So we are primed to be able to pull the trigger and make acquisitions, again, when it makes
06:51sense.
06:52But we're always going to be thoughtful.
06:54We have a list of candidate targets that we are evaluating.
07:00And we will act with some conviction as and when we believe that the target acquisition
07:11will be right for us.
07:12And Warren, it's the WinFast overhang finally behind you.
07:16No more downside expected from them.
07:19And also, was this a WinFast-specific account problem or do you feel like this could be
07:24seen or have you seen this across other clients as well?
07:28I just want to get a sense whether this is really restricted to one company or a sector
07:33as a whole.
07:36I think if you look at our customer base, it's a mix of traditional OEMs and associated
07:43supply chains.
07:45And it also includes new energy vehicle companies like WinFast.
07:49I think with new energy vehicle companies, we have the opportunity to demonstrate the
07:54end-to-end capabilities that we represent.
07:58And with WinFast, we took the entire responsibility concept through the launch of the two SUVs
08:04that we were responsible for end-to-end.
08:06So we will continue to expose ourselves to that side of the market because a lot of thought
08:14leadership and a lot of innovation is coming from those types of companies.
08:19But those companies follow a very specific kind of lifecycle.
08:24They invest in new product.
08:26They then build product.
08:28They generate demand.
08:30And based upon their ability to be able to sell product, they then invest in follow-on
08:36products that will enhance and build out their portfolio.
08:41We expect that to happen with WinFast.
08:44They've launched now four SUVs in the last 12 months.
08:50They are generating demand in different parts of the world.
08:54And I think if they're successful with satisfying that demand, there's no question that they
09:01will invest in follow-on vehicles and capability.
09:06And given the success that we've enjoyed with that organization and through that partnership,
09:11we would expect to be part of their future plans.
09:14And I think one of the things that I'm very proud of is the fact that despite the fact
09:19that we've had material runoff at WinFast, we've managed to backfill that.
09:25I think I've commented in the past that last year outside of WinFast, we grew the business by 30%.
09:32The runoff is, as you mentioned, largely behind us.
09:37We expect to return to sequential growth in Q2 and beyond.
09:42And we have not seen any softening of demand outside of WinFast in any of our other customers.
09:50And so we're very bullish about the continued momentum that we are building inside of the company.
09:57One of the concerns when you were listing as well was that Tata Tech has a very concentrated portfolio.
10:04Have you managed to change that around?
10:06Because we've seen the fallout of that through WinFast, right?
10:09Does your portfolio look a lot more diversified today in terms of client base?
10:16Yeah, I think if you look at some of the announcements that we've made in the last six months,
10:22we've announced the partnership with Agritas.
10:25You know, that partnership advances our capabilities upstream as far as the EV value chain is concerned to include now pack design.
10:35We're also going to get involved in the industrialization of the two Gigafactories,
10:39one in Gujarat and the other in the southwest of the UK.
10:43We also announced, I'm sure you'll be aware of the partnership with BMW.
10:49BMW came to India, evaluated all of the candidate ER&D organizations,
10:56many of which had incumbent relationships with BMW.
10:59But they made a decision to partner with Tata Technologies,
11:03which we think is a testament to the breadth and depth of our capabilities,
11:07particularly in software defined vehicles.
11:10But we also think it's a testament to the attractiveness of the value system that underpins the Tata group.
11:16And so I think those are two very high profile examples of the diversification that we're affecting as far as our customer base is concerned.
11:25And we'll continue to be very focused upon a small number of very strategic partnerships that we build with our customers,
11:33because the type of proposition that we represent requires a level of customer intimacy that cannot be extended to 100 companies.
11:43So we believe that our ambitions in terms of growth are predominantly going to be satisfied by focused relationships with between 20 and 25 customers.
11:56Just a quick word on the Nifty.
11:58And there's been a little bit of improvement, the Nifty and the Sensex both have recovered from the day's low point.
12:02The Nifty at its design, the Sensex now marginally trying to fight its way into positive territory.
12:08We'll wait for it. But the Nifty not looking as bad as it did at 9.15 this morning.
12:14Warren, you know, we're talking about these deals and the strategic relationships that you've gotten into with the likes of a BMW.
12:20What's the average time horizon and payment cycle or life cycle of these relationships?
12:26There's no kind of, there's no life cycle that defines all of our,
12:34there's no standard life cycle that defines all of the relationships that we have with our customers.
12:39You know, some relationships take a while to build, you know, customers will test us in terms of capabilities.
12:48We will build relationships with the leadership team.
12:52Confidence will grow and that will inform the scale that we will then drive jointly between ourselves and that customer.
13:03You know, other relationships like BMW will start from a position of no history between the two organizations.
13:16And given the strategic intent of that customer, they will scale very quickly.
13:20And that's what we've seen with the work that we're doing with our colleagues in Munich.
13:26So there's no one size fits all.
13:30But I think the characteristic that we really look for is customer intimacy and strategic commitment between the leadership team.
13:42You know, when we are entrusted with next generation product, we're being entrusted with the family jewels of that organization.
13:50And so it's imperative that we build relationships that represent a commitment from us to our customer.
13:58And just as importantly, a commitment from the leadership of our customer to Tata Technologies.
14:04And Warren, very lastly, because we are short of time, but is it a good chance that you will outpace the growth you deliver in FI24?
14:13We don't provide specific guidance, but we continue to be optimistic about our prospects for growth this year and beyond.
14:23So, you know, the momentum inside of our organization continues to build.
14:29Warren, thank you very much.
14:30You have a good trip to the US and we'll hopefully see you back in the city at some stage later.