TATAS PUT BOMBAY HOUSE IN ORDER
A year after Cyrus Mistry’s ouster, Chairman N Chandrasekaran has reduced cross-holdings, formed a JV between Tata Steel Europe and Thyssenkrupp and exited Tata Tele’s consumer mobile business
Thebiggestrestructuringinthehistoryof CorporateIndiamaywellbeunderwayas TatagroupChairmanNChandrasekaranaims toremoveimpedimentsatthe$105-billion group. DEV CHATTERJEE writes
The biggest restructuring in the history of corporate India could well be underway as new Tata group chairman N Chandrasekaran aims to remove impediments at the $105-billion group.
Ever since Cyrus Mistry was removed as chairman on October 24, 2016, Tata group has fought back valiantly by increasing stake in group companies, merging the loss-making telecom business with Bharti Airtel and hiving off Tata Steel Europe to a joint venture with Thyssenkrupp of Germany.
However, the Diwali cleaning in Bombay House, the group headquarters, is far from over. “The group has done very well. It has got out of telecom and hived off the European steel business but a lot more needs to be done,” said the chairman of a large conglomerate, asking not to be named.
In the coming months, Chandra, as the chairman is fondly called, will have to take a call on how to turn around the passenger car division of Tata Motors and Tata Power’s Mundra (Kutch) plant, which is losing money on every unit of electricity sold. Indian Hotels, operators of the Taj group of hotels, is still undecided on what to do with its Sea Rock property in Mumbai. The building, which was demolished to construct a new hotel, has stalled due to lack of clearances.
The group, however, is clear it would do its best to retain the iconic Taj Mansingh in New Delhi, which is coming up for auction soon.
For the group, the battle with Mistry came at a wrong time. The group, which made some wrong calls in its effort to become a global conglomerate, was unable to find a way out of “legacy issues”. Mistry was attempting to solve these at the time of his ouster.
With Chandra, who had made his mark as chief executive officer of Tata Consultancy Services, being chosen as Tata Sons chairman, things started looking up. The mood among the group’s 700,000 employees changed with his arrival, and the future, they say, is “optimistic”.
Chandra’s bold steps
Chandra’s first steps, after his appointment this year in February, was to meet various CEOs and board members of Tata group companies to seek their views on how to solve the issues raised by Mistry. Chandra also met independent directors — who had initially opposed Mistry’s removal from the boards — and apprised them about his plans. Most of them decided to back him to the hilt. “I will focus on three strategic priorities,” Chandra said in a statement as soon as he joined. “Leverage the group’s strength, improve operating performance in companies, bring greater rigour to our capital allocation policies and deliver superior returns to our shareholders.”
Chandra also decided to build an A-team by hiring industry veterans. He hired investment banker Saurabh Agrawal as group CFO, Shuva Mandal as group general counsel and investment banker Ankur Verma in the chairman’s office with a “diverse portfolio”.
The new team led by Chandra soon started delivering results. First, Tata Sons put cash in the books of operating companies by buying their stakes in other group companies. In September, Tata Steel announced the merger of its European business with Thyssenkrupp into a 50:50 joint venture (JV). Tata Steel would transfer ^2.5-billion debt to the JV and cutting losses.
The next month, the spotlight shifted to the loss-making Tata Teleservices, where the consumer telecom business was merged with Bharti Airtel for free. Tata also announced the enterprise business would be combined with Tata Communications, while the fixed line and broadband business would be merged with Tata Sky. “We’ll take the near-term pain to gulp down the poison and finish it off and resolve it,” said Saurabh Agrawal. The group also indicated that it would sell 51 per cent stake in its Mundra power project to Gujarat Urja Vikas Nigam for ~1 and turn around Tata Motors’ domestic passenger car and commercial vehicles businesses. While the group is selling loss-making businesses and restructuring others, it is also looking for new opportunities, which could include a bid for Air India as well.