Warren Kevin Harris, CEO & MD, Tata Technologies, says “I truly believe that India will be the innovation hub, the platform from which the majority of product development work will be driven in the future. We believe that we are in a fantastic position to be able to fulfill that potential for Tata Technologies, for the Tata Group and to make a meaningful contribution to what will happen to the industry over here.”
On Tata Technologies IPO plans
I am very much looking forward to the plans that we have got for the organisation. As you confirm, this is the first IPO of the Tata Group in the last 18-19 years and it is an OFS. As an organisation, we are very much looking forward to the endorsement that it will provide. The scrutiny that the financial markets will apply to our organisation will certainly reinforce the trust between ourselves and our customers. The profile that the listing will provide will also provide us with an opportunity to position the company effectively to help us recruit the best and the brightest in the very exciting space of the emerging engineering, R&D market in India.
I was analysing the valuations you are coming out with and offering the shares to the public. I am not really surprised that the Tata Group is leaving some value on the table for investors. How should a company such as yours and an auto tech company be analysed and what metric is the right way to look at it?
I think in terms of valuation, the discovery exercise and process that we have been through has been informed by the feedback that the banks have received from the investors after the road show, a recommendation has been made to the board and the board has adopted that position.
In terms of the way in which we are measuring our company, I always position for our teams that there are three priorities that we have got and that is growth, growth and growth. The market here in India continues to grow at a faster rate than the addressable market globally and so we think that we are in a very exciting swim lane.
We believe that the credentials that the company has established over more than 20 years, the customer base that we have, the capabilities that are truly differentiated, put us in a very favourable position and we are excited about the space; we are also excited about the position that we Tata Technologies are in. We are absolutely invested and committed to growing with the market and to fulfilling the potential that we believe that we have.
I was just looking at the geographical breakup; 30-40% of your revenue comes from India and the others are from the rest of the world and Europe. It is pretty diversified, but still, how is the mix likely to pan out in the next three to five year period?
In terms of Tata Technologies, one of the things that differentiates us is that although we are very proud of our position here in India, we are very much a global company, we are not an India out company and so we practice a very balanced onshore, offshore proposition and we have got a very balanced set of revenues from different parts of the world. We are active in Europe, North America and here in Asia. We manage our operations around 19 different delivery organisations and what that allows us to build very strong and strategic relationships with our customers onshore and that provides the interface and the leadership from which we deliver value from our offshore locations here in India and in Eastern Europe.
You spoke about how the idea is growth, growth and growth. What kind of outperformance do you expect from the company going forward or are you aiming for internally as well with your team versus the sector because the sector itself is a high growth sector? Could it be mid-teens to higher teens? How are you measuring growth?
We do not provide guidance as an organisation and as a group but what I can tell you is that we are incredibly ambitious in terms of the value that we want to deliver to the customers that we work with, we are incredibly ambitious in terms of growing the breadth and depth of the capabilities that we represent. We truly believe that India will be the innovation and the engineering hub for the global manufacturing sector. We are confirmed by Zinnov as the number one automotive engineering service provider in India and we are going to work very- hard to protect that position.
Also talk to us about new growth levers which you can be pressing. You have expertise in engineering R&D especially in automobile space and also there are newer avenues beyond automobiles, maybe aviation. a high growth potential market in India and abroad. Would that provide both better growth prospects and higher margins going forward?
If we look at automotive first and foremost, you know we are going through a once in a generation transformation, along the vectors of change as the industry pivots towards autonomous driving, connected services, the move from internal combustion engines to electrification or alternative propulsion systems and the move to shared mobility.
One of the things that distinguish Tata Technologies is that we have been part of that journey almost since the outset. And one of the things that distinguishes our company is our ability to be able to take on the responsibility for the development of a full electric vehicle. We are incredibly well positioned in the automotive space. We are also excited about what we are doing in aerospace and transport, construction and heavy machinery.
The aerospace industry has really bounced back in a very healthy way since the pandemic. Companies like Boeing and Airbus cannot produce enough aircraft today to satisfy the demand. If you look at the industry projections, there are about 22,000 aircraft in productive use today that is deemed to more than double in the next 20 years. That is going to drive significant demand for engineering services and we believe that that will provide tremendous tailwinds for organizations like Tata Technologies.
As far as transport, construction and heavy machinery is concerned, that industry typically lags automotive by three to four years and in the construction, mining and farming space, we are seeing the same type of disruption as the industry pivots to cleaner emissions and smarter capabilities through the introduction of technology and software.
What is the intention of the company going forward? Transportation is your mainstay and 65% of revenue is coming from there but would it change going forward? Would you like to bring it down to 40% odd or any other kind of a number in mind while other segments also grow meaningfully in the coming years?
We certainly see significant demand in automotive and the associated mobility space and we will be focused upon making sure that we harvest the opportunity that that represents but we certainly see significant opportunity outside of that. Aerospace I referenced before what is happening within the broader market but also the investments that the group is making, the acquisition of Air India, the procurement that Air India has undertaken of 470 single aisle and wide body aircraft, that is affording the group a significant amount of influence globally and those tailwinds we expect to be able to position effectively for Tata Technologies.
So again, I am not going to provide any guidance in terms of the balance between the different sectors that we support but we see growth opportunities across the board and we are absolutely focused upon exploiting that in the context of fulfilling the potential that we have worked hard inside of Tata Technologies to position for ourselves.
We started a conversation on that note that the company is not hitting the street for demand of funds actually, it is an OFS. It is more about making a statement and deriving confidence and validation from the Street as well as scrutiny for all the right purposes. If anyone wants to take a 3-5-year and beyond a view on the company, what would your bigger message?
If we look at the way in which the industry is evolving, if you look at the global addressable space for engineering service providers, it is about $100 billion and that addressable space is growing faster than the overall engineering research and development market but the contribution from India is growing at a faster rate than the addressable market. We are number one in automotive here in India, we are investing very heavily to improve our positioning in aerospace, transport, construction and heavy machinery.
As I referenced before, I truly believe that India will be the innovation hub, the platform from which the majority of product development work will be driven in the future. We believe that we are in a fantastic position to be able to fulfill that potential for Tata Technologies, for the Tata Group and to make a meaningful contribution to what will happen to the industry over here.