How the Tata Group Turned into a VC and Found a Huge Multibagger

Lian Yun was staring at a screen displaying infrared images.

The images were of people passing through the eastern gate of Chengdu's railway station. This was just a few weeks after Covid-19 cases peaked in China.

Yun's job was to keep a watch on the body temperature of all the people passing through the gate. Of course, several people were doing so simultaneously.

So, how did Yun check everyone's body temperature without stopping anyone?

Unique technologies in thermal scanners were believed to be China's weapon to contain the spread of Covid-19 back in 2020. China succeeded in flattening the virus curve early in 2020 with technologies like Artificial intelligence (AI) and Internet of things (IoT).

This encouraged medical authorities in South Kora and the US to try them in fighting the pandemic. But countries like China, the US, and Korea are not the only ones to identify and exploit breakout technologies at such crucial times.

In India, several tech start-ups showed their mettle in the pandemic. Most were backed by venture capitalists (VCs) who had been funding them for years.

Now the VC culture may be new to India. But there is one VC that has backed tech innovations for decades.

It was late 1970s. Tech start-ups were mushrooming in Silicon Valley.

A couple of Indian students and professors at Massachusetts Institute of Technology (MIT) got together to found a tech start-up to build a mini supercomputer.

It was no ordinary device but one to facilitate multiple processes over a common platform, a first in the world. Soon the startup found itself short of R&D funds and was on the verge of shutting down.

The Tata Group, quick to spot early opportunities, became a venture capitalist in the supercomputer project.

The company was renamed to Tata Elxsi and shifted to Bengaluru. Elxsi stands for Electronics X system integration.

A large part of its early years involved product designs which consumers could feel, touch and see physically. The high-end workstations were the best in the world for industrial designs and animation.

Since 1992, Tata Elxsi focused on three high growth sectors - media, telecom, and automotive. What differentiated Tata Elxsi from other tech companies was that it had design as its core.

In a typical project, design is not more then 5-6% of the volume of technological work. But the ability to offer customised design allowed Tata Elxsi to command premium pricing.

With a clientele spread across the world, 90% of the company's technology solutions are delivered abroad. In India, Tata Elxsi caters to the most tech savvy MNCs and cash rich businesses.

This has kept Tata Elxsi, a cash rich, debt free, high margin business, despite the pandemic.

The stock has been one of the most resilient even when other tech stocks succumbed to the global tech sell off in late 2021.

StockSelect subscribers have seen their investment in the stock go up about 8x in the past two years.

The Tata group may have multiplied their investment 233 times since 2002.

Of course, every business comes with some degree of risk. And all technology stocks are subject to massive execution risks.

You may call Tata Elxsi a much-hyped tech stock. But despite its expensive valuations today, the stock has much steam left for decades.

But if bought at steep valuations, you can lose money in hyped tech stocks. You need to be extremely selective and careful with such stocks.

I'm sceptical of business models and valuations of some new age businesses. Especially the ones already facing stiff competition and making losses.

But like Tata Elxsi, a lot of midcap technology companies are critical cogs in India's tech ecosystem. And several Tata group like VCs are making the most of this opportunity.

For more investing ideas like this one, watch this space.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)