According to persons familiar with the situation, the Tata Group has held negotiations with Microsoft Corp. about becoming an anchor investor in its new digital platform. According to them, the coffee-to-cars business is looking for one or two key investors before launching a full-fledged fundraising campaign.
As behemoths like Amazon and Mukesh Ambani’s Reliance Industries surge into the country’s budding ecommerce industry, Tata Sons Chairman N Chandrasekaran has increased the ante on modernizing the group’s diversified consumer operations by merging digital assets across several divisions under a new organization.
Insiders say Chandrasekaran wants to follow Reliance Jio’s lead, which saw the telecom raise Rs 1.45 lakh crore ($20 billion) from investors last year, with key equity partners like Facebook (Meta Platforms Inc.) and Google (Alphabet Inc.).
According to sources close to the situation, the $103 billion Indian conglomerates expects to finalise the anchor investors by the beginning of next year. However, they stated that the talks with Microsoft may not result in a transaction.
“Proof of concept is a difficult task for new investment. Jio already had a functional product. All of Tata’s puzzle parts are still missing. Isn’t the super app where it’s supposed to be?” As the conversations are still secret, an executive spoke on condition of anonymity.
Tata Sons have remained silent about the issue. Microsoft has declined to comment on the topic, according to a spokeswoman.
Microsoft has been acquiring companies or investing in them among the Big Tech corporations. With seven agreements in the third quarter of this year, including six buyouts and a $5 million stake in budget hospitality company Oravel Stays, it came close to breaking records (Oyo).
ET was the first to report on June 22 that the Tata Group is looking to raise $2-2.5 billion for its digital venture. The assignment has been given to Goldman Sachs.
Among the Big Tech corporations, Microsoft has been purchasing or investing in businesses. It came close to breaking records in the third quarter of this year, with seven transactions signed, including six buyouts and a $5 million holding in bargain hotelier Oravel Stays (Oyo).
A Source Says…
According to the CEOs, Chandra has been spearheading most of the early discussions. After meeting with Microsoft executives in the United States, he is said to have conducted meetings with Anant Maheshwari, the company’s India head.
There is a high level of trust among investors in the Tata Group. Investors are also waiting to see how consumers react to the app once it is fully launched, as Tata Digital is talking about long-term goals, According to a source within the Tata Group.
Some of Chandrasekaran’s sovereign funds, particularly those from the Middle East, may be familiar with the Jio capital table and hence invest from other arms, such as Flipkart’s recent capital round, to avoid future conflicts of interest.
In 2020, Jio and Microsoft will collaborate on enterprise solutions.
Tata Digital has previously bought controlling holdings in e-grocer BigBasket and digital health startup 1mg, as well as investing in fitness company CureFit, with a total investment of Rs 5,025 crore this fiscal year. Tata Sons, the group’s holding business, is home to Tata Digital.
The Tata Group has invested Rs 5,100 crore in two of its firms so far, marking the group’s highest-ever money injection in the digital commerce business in a single year. The amount of money to be invested hasn’t been decided yet.
Big Tech has had a successful year. Big tech corporations like Google parent Alphabet Inc. and Microsoft have seen record sales as the Covid-19 outbreak has exacerbated the need to digitize enterprises.
Demand has remained stable as businesses have transitioned to cloud computing, thanks in part to remote working, while Google’s ad sales have increased as travel and retail patterns have improved around the world.
Year to date, Microsoft stock has increased by 54.5 percent.
Microsoft’s quarterly revenue growth in October hit a new high of 22 percent, the most since 2014, thanks to the performance of its cloud segment, which climbed by 36 percent, according to corporate data.
This has also aided the Redmond, Washington-based firm’s acquisition of businesses across a broad range of industries. To strengthen its cyber security and cloud capabilities, it has invested in RiskIQ and CloudKnox Security.
TakeLessons and Clipchamp served to centralise digital media, whereas Peer5 was mostly for networking. Big data (Suplari) and ecommerce (Oyo) were also strong contenders.
Microsoft is known for significant bets, from LinkedIn to Nuance, according to a technology-focused investment banker. “The FAANG businesses are under increased regulatory scrutiny, offering Microsoft a golden ticket to pursue tentpole acquisitions.”
FAANG (Facebook, Amazon, Apple, Netflix, and Google) are acronyms for Facebook (now Meta), Amazon, Apple, Netflix, and Google (parent entity Alphabet).
This year, Microsoft paid $19.7 billion for Nuance Communications, a speech synthesis and speech recognition business, making it the second-largest M&A deal ever after the $26 billion LinkedIn deal in 2016. The US Securities and Exchange Commission and the European Commission approved its $7.5 billion acquisition of video game studio ZeniMax earlier this year.
At the same time, Microsoft completed the acquisition of the Marsden Group, a company that specializes in industrial technology innovation and fast prototyping.
