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Tata Sons Contemplates $1 Billion Investment in Tata Digital

Tata Sons contemplates a substantial $1 billion investment in Tata Digital, reflecting its commitment to bolstering its digital arm amidst strategic leadership changes and expansion plans in the competitive market landscape.

Tata Sons, the conglomerate encompassing diverse sectors from salt to software, is deliberating a substantial infusion of approximately $1 billion into its digital arm, Tata Digital, over the coming years.

Strategic Investment Focus

This strategic move follows Tata Group's recent decision to halt external fundraising for its ecommerce entity, Tata Neu. Earlier considerations in October last year had hinted at a potential additional investment of $1 billion in the super app Tata Neu, indicating Tata Group's steadfast commitment to its digital ambitions.

Capital Infusion Plans

Tata Sons has already injected over $2 billion into Tata Neu and holds board approvals for further capital infusion over a span of five years. The company raised its authorized share capital from INR 15,000 crore to INR 20,000 crore in 2022, aiming to secure additional funds from Tata Sons. Additionally, Tata Sons had infused INR 5,882 crore into Tata Digital during the same year.

Strategic Review and Leadership Changes

The infusion aligns with Tata Digital's ongoing review of its digital strategy, coinciding with the recent appointment of a new CEO. The company intends to focus on execution and scaling under the new leadership before considering external investments. This move follows a series of high-level exits within Tata Digital, including the resignation of chief software architect Pavan Podila and chief information security officer Samir Aksekar.

Expansion into Online Food Ordering

Tata Neu, an integral part of Tata Digital's ecosystem, is gearing up to venture into the online food ordering service through the open network for digital commerce (ONDC) route. Launched in April 2022, Tata Neu aims to streamline various services, ranging from hotel and flight reservations to grocery and electronics, under a single platform, drawing inspiration from China's Alipay and WeChat.

Financial Performance and Market Challenges

Despite its ambitious endeavors, Tata Digital faced significant challenges at the time of Tata Neu's launch, including glitches and poor user experience. The app is yet to gain substantial market traction despite its diversified offerings. Tata Digital reported a notable 5.6X year-on-year increase in consolidated net loss to INR 3,052 crore in FY22, despite a threefold increase in income to INR 16,201 crore during the same period.