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Tata Sons to invest $1 billion more in digital arm, Retail News, ET Retail


Tata Sons is poised to invest about $1 billion in Tata Digital, over the next few years, people familiar with the matter said. This comes as the parent of the diversified Tata group puts a pause on external fundraising for the ecommerce entity, which houses the superapp, Tata Neu as it reviews its digital strategy with the appointment of a new chief executive officer this week, the people said.

Tata Digital will only tap external investors after the new CEO sets down to focus on execution and scale, one of the persons said.

Earlier this week, Tata Digital appointed Naveen Tahilyani, the former managing director of Tata AIA Life Insurance, as its CEO & MD. Tahilyani replaced Pratik Pal who had been holding the charge since the company’s inception in 2019.

Tata Sons has invested more than $2 billion in Neu so far and has board approvals for further capital infusion over a five-year period, the people said.

A spokesperson for Tata Sons did not respond to ET’s queries.

Multiple people aware of the management changes said Tata Sons chairman N Chandrasekaran wanted a senior hand with consumer background to steer the next stage of expansion for Neu. “The top brass wants Tata Digital to work on making its operational structure more efficient and agile and scale up the business,” a person said.

Meanwhile, the superapp has begun integrating Air India on the platform which is being rolled out to users as a pilot in phases, the people said. Going forward, one of the key focus areas for Neu would be the fintech vertical.

“They (Neu) have seen what’s working in commerce and what’s not. Certain hypotheses have failed and the process will be reviewed with the new CEO in place now. But the message is clear that fintech will be scaled,” one of the persons said.

Another person added that the annual operating plan has been finalised for online pharmacy 1mg online pharmacy, and that for online grocer BigBasket would be discussed in an offsite meeting next week. “Certain segments may go in the background and they would double down on what’s working for them so far–keeping in mind that profitability has to be maintained,” this person said. “Earlier, bigger rivals like Flipkart and Amazon were aggressively burning cash but everyone has gone slow now and there is a softness in consumer demand as well. So, profitability is core to any plans–going forward.”

Tata Neu was also working on revamping its loyalty pass program Neu Pass but that plan will also now take time to be finalised with the new CEO in place, a person said.

The company will also need to address customer complaints about glitches, poor user experience and payment issues in the app, one of the persons said.

Chairman Chandrasekaran had also been impatient with the progress of the superapp so far. “The company needs a strong consumer approach, especially in execution and scaleup; that is what Tahilyani brings to the table. Scale and profitability is now the focus. And Tahilyani has to bring in a more integrated approach to the business” a person said.

Neu contributed less than a tenth of gross sales to Tata’s two biggest digital assets—BigBasket and 1mg—since its launch in April 2022.

Tata Sons has had initial talks with sovereign funds and financial investors but it yielded limited results amid the slow progress of the superapp, said a person aware of the discussions.

Analysts had valued Tata Digital at an estimated $15 billion (Rs 1.24 lakh crore) based on the gross merchandise value of key categories on Neu.

Neu, which comprised electronics, grocery and e-pharmacy, has not faced strong consumer loyalty in its first year of operations. It later onboarded Air Asia, Indian Hotels and other Tata group companies like Titan, Tanishq and Westside. For financial services, the company launched the Tata Neu HDFC card in November. The app also bundles loyalty programmes of Titan, Tanishq and Westside with the NeuPass. Apart from loans and insurances, the app also allows users to make United Payments Interface (UPI) transactions and bill payments.

  • Published On Feb 9, 2024 at 09:33 AM IST

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