Can the Tata boss walk the talk? POWERPOINT

In interviews to CNBC-TV 18 and The Economic Times earlier this week, Tata Sons Chairman N Chandrasekaran said he thinks the group has become very complex and needs to be simplified. “The more we see ourselves as many companies, nothing will get done,” he was quoted as saying. The statement has justifiably created waves on social media, with many saying that the new chairman is opening up a brave new world for India’s largest private conglomerate.

There is no doubt that the new chairman’s vision is brave, but one is not so sure whether it is “new”. His predecessors Ratan Tata — and even Cyrus Mistry — expressed similar intentions several times over different time periods. The track record, however, has been a mixed one.

Consider this: In a March 1994 interview published in group website tata.in — three years after he took over as the group chairman — Mr Tata said that the critical task before the group was to refocus. “We must restructure and divest non-core businesses”. Tata said he wants to make the group a leader in a few key industries. The report also quoted Tata Sons’ then director Freddie A Mehta as saying that “we are rigid and are in a way too many products. There is no use asking the government to reform if we don’t do it ourselves”.

Cut to 12 years later — August 2006. In another interaction with the group’s website, Mr Tata said his view is that the group should keep looking dispassionately at its business portfolio and “should ease out of certain sectors, but do it in a dignified way that protects our employees and all our stakeholders. We should dispassionately look at exiting certain sectors, businesses or companies and embrace new opportunities when they come”. He also talked about the “dilemma of what to do when attractive new sectors open up”.

Mr Tata wasn’t alone. Some of his top executives also said the same thing over and over again. Here is just one example from — again — the tata.in. In September 2002, then Tata Sons Director J J Irani is quoted as saying that Tata Sons has decided to significantly reduce the number of subsidiaries to make the group leaner and stronger and that the Tatas would disinvest in units where it did not have core competence.

Mr Mistry wasn’t far behind. tata.in quotes him as saying in September 2016 that the group’s “individual companies need to earn the right to grow”.

In his interaction with media, Mr Chandrasekaran has no compulsion to say anything new (he roughly said the same thing in another interview to Fortune magazine a couple of months ago), but no one can quarrel about his broad point that the 149-year-old group needs to simplify its hugely complex structure where 110 operating companies continue to exist, earning the group the nickname “salt-tosoftware giant”. Some of its biggest businesses have grown sluggish and have become vulnerable to smaller, nimbler rivals, while some are too small to compete globally. And far from slimming down, the group is eyeing still further expansion: Defence, infrastructure and financial services are the latest targets, though there is no public explanation as to why Tata Finance, Tata Housing Finance, and Tata Capital Finance still operate as separate companies.

Restructuring and pruning of portfolios are a must as the group has been overly dependent on two of its companies — Tata Consultancy Services and JLR, both of which have had a standout run. TCS’ share-price surge in the past decade is responsible for roughly 80 per cent of the growth in value of Tata Sons’ holdings in the group’s listed operating companies. TCS’ cash generation has helped the Tatas maintain a growth streak despite poor profitability at the rest of the group since the 2008 global financial crisis. This over-dependence on a handful of companies shows why the group needs to go in for a huge amount of rationalisation and slash the number of operating companies, which are now only loosely organised under the group’s control.

But the new chairman’s ambivalent stand on the Nano came as a disappointment. He said, Nano’s loss on a yearly basis is only about 4 per cent of the losses that our passenger cars make, so whether you shut down Nano or whether you give it a life, the number is not going to change; and this is not a billion-dollar question in front of Tata Motors. That’s not an encouraging sign at all.

The Tata group’s well-wishers would want Mr Chandrasekaran to indeed hive off the cash guzzlers and invest in the winners by overcoming the group’s legacy problems. He has made a decent beginning by conceding that a turnaround of Tata Teleservices is difficult and that he is committed to take a tough call within this financial year. And, the proposed joint venture with Germany’s thyssenkrupp AG that will create Europe’s second largest steel maker provides Tata Steel an opportunity to stem further bleeding of its heavily loss-making European operations.

One hopes he would walk the talk on some other group companies as well.