After ADAG, Tata to venture into investment banking

Tata Sons Limited, the holding company of $22-billion conglomerate Tata Group is setting up a wholly owned financial services subsidiary Tata Capital Ltd to get a bigger spread using its experience and expertise, and support and grow its existing businesses.

The company will work as a pseudo bank and provide services ranging from capital market services, housing finance, assets and vehicle financing, retail finance, merchant banking and manage private equity investment among other related activities.

Currently the financial services business of Tata Group is scattered along different companies. For life and general insurance, it has a tieup with AIG and has an AMC Tata Asset Management. Other companies include Tata Financial Services, Tata Investment Corporation and Tata Motor Finance.

Tata had presence in the above segments previously also. In 2003, it sold off its housing finance company Tata Homefinance Ltd to IDBI for Rs.50 crore. It had an NBFC, Tata Finance Ltd which was later merged into Tata Motors Ltd. It was infamous for being involved in Ketan Parekh scam.

The move may pay off for Tata as they can exploit opportunities in the booming financial services sector, as the number of companies raising money are increasing and capital market is also showing bullishness thus creating need for intermediaries. It could also leverage on its strong brand equity.

Currently, all of its present activities would be operated separately though eventually the better option would be merge all the finance activities and offer services under one company to gain on economies and prevent overlapping of operations.