Natarajan Chandrasekaran had no choice. An avid marathon runner, he has had to change his pace and break into a sprint from the moment he was elevated from chief executive officer and managing director of Tata Consultancy Services (TCS) to chairman of Tata Sons in February this year, effectively making him the head of the Tata empire. The unceremonious removal of Cyrus Mistry last October had sent shockwaves across the vast federation of the 100odd Tata Group companies, which the brief, temporary return of Ratan Tata as his successor did little to quell. Chandrasekaran knew he had to get a lot done quickly to overcome pain points and bring back calm.
His first step was to restore communication with other board members which had practically broken down with Mistry at the helm. It is said in Tata Group circles that Mistry had virtually stopped talking to Ratan Tata towards the end of his truncated term, and that, when he presented the Tata Sons board with two of his most important decisions – the first, to exit Tata’s entire steel business in UK which had been bleeding, and the second, to buy the Welspun Group’s complete renewable energy portfolio for `10,000 crore – he was met with stony silence.
Accordingly, Chandrasekaran has already held three board meetings in his four months in office, against Mistry having convened just eight through all of 2015/16. He has also made it amply clear where his loyalties lie, ignoring all the charges Mistry levelled against the Tata Group after his ouster. Indeed, in a letter to Tata employees, he called Ratan Tata “an inspiration for all of us in the group”, adding that he looked forward to working closely with him and “taking the group forward in the same spirit”.
Change in the Air
February 21, when Chandrasekaran took over as chairman, was also the day Tata Sons finally resolved its two-year long legal dispute with partner NTT DoCoMo, agreeing to pay $1.18 billion to buy out the Japanese mobile operator’s stake in Tata Teleservices Ltd (TTSL). Alongside, the TCS
decision to buy back `16,000 crore worth of its own shares, taken just before Chandrasekaran moved to Tata Sons, resulted in a gain of over `10,278 crore for Tata Sons, which holds 73.26 per cent of TCS. (The fall in income at Tata Trusts, the majority stake holder in the holding company Tata Sons, which comes from group companies as dividend and other benefits, had been cited as one of the reasons for Mistry’s ouster.)
A third key decision has been to sell 51 per cent stake in Tata Power’s loss-making coal-fired power plant in Mundra, Gujarat, for a nominal `1 to the state government, its principal procurer, though no deal has materialised yet. A fourth is a new approach to Tata Steel’s ailing business in the UK and Europe, which Mistry wanted to get rid of entirely, but which Chandrasekaran is now planning to merge with ThyssenKrupp AG in Germany. He has also begun disentangling the cross holdings among Tata companies, starting with Tata Steel’s stake in Tata Motors. He has brought in a range of fresh talent at the top to equip the group better for tackling challenges.
Chandrasekaran’s appointment has made no difference to the Tata Group’s fortunes in the stock market. The market-cap of the 26 listed Tata companies fell 0.3 per cent to `8.3 lakh crore in the four months between Mistry’s sacking and Chandrasekaran’s appointment. With Chandrasekaran’s entry, it is down another 2.5 per cent to `8.1 lakh crore, thanks mainly to the crisis Indian IT companies are facing with their US business – their prime source of income – following the protectionist policies of President Donald Trump. TCS, the leader among them, contributes around two-thirds to the Tata Group’s total profits.
Luck by Chance
It was fortuitous for Chandrasekaran that the Tata Sons settlement with DoCoMo coincided with his taking charge, bringing closure to a long-festering tussle between them. It related to the 26.5 per cent stake DoCoMo had bought in TTSL in 2009, with the proviso that it could withdraw after five years if things did not go right, selling the stake back to TTSL at a minimum of 50 per cent of the price it paid. With TTSL foundering, DoCoMo chose to exercise this option, but with the company’s valuation falling steeply, the Reserve Bank of India (RBI) objected to the deal, saying it would have to be at a fair market value.
In response, DoCoMo approached the London-based Court of International Arbitration citing its contract. In June 2016, the court upheld DoCoMo’s position and directed Tata Sons to pay $1.18 billion in damages. The two companies then filed a number of cases against each other across India, the UK and the US, until the Tatas finally decided to make the payment. In late February, Tata Sons and DoCoMo jointly approached the Delhi High Court for a settlement, which in turn, in April, upheld the London court’s view, overruling the objections of the RBI.
Still more fortunate for Chandrasekaran has been the rise in
N. Chandrasekaran has brought in a range of fresh talent at the top to equip the group better for tackling challenges