Early this year, the driver of a Tata commercial vehicle cruising on a national highway was holding an animated discussion about engine and vehicle efficiency with an unlikely co-passenger — Cyrus Mistry, the 47-year-old chairman of the $108.78 billion Tata group. Mistry was seeking feedback from the driver close to the launch of the new Tata Signa.
Mistry was as comfortable riding on the truck to help Tata Motors, as he was driving the board of Tata Steel last month to its decision to sell its loss-making UK assets. He is rolling up his sleeves and walking the talk, whether it is on the ground or in working closely with CEOs and the management teams of companies, especially the ones facing challenging situations such as Tata Motors or Tata Steel.
He has been making a series of tough and pragmatic decision, leading every one of them from the front. “Our group chairman does his homework. And in a sense he is really our group CFO; he is a solid numbers man. And that focus on numbers is backed by an ability to get on the ground, roll up his sleeves and get to the heart of the matter,” says a Tata company MD requesting anonymity.
The decision to let go off the UK assets was made after over two years of understanding issues on the ground and trying to find a solution with the CEO and management team of Tata Steel. “These are challenging situations and answers are not always easy. But there was no sustainable future strategy to make a case to hold on to the assets,” says an official close to the development. So Mistry took the call.
This was not the first tough call he made and it won’t be his last.
Late in 2013, a year after Indian Hotels made an offer to buy London-based Orient Express Hotels, the group chose to withdraw its $1.86 billion bid amid concerns of a global hospitality slump. Indian Hotels’ 10-member board took a decision not to pursue the expensive buyout and instead recognised an impairment of ₹ 373 core on its earlier investment in Orient Express.
Similarly, Tata Chemicals made a write down for its Africa operations; Tata Steel made a non-cash write down of its Mozambique project investment and Tata Motors too made a write down of its investment in Spanish bus maker Hispano Motors. InDecember2013,TataChemicalsshutdown its soda ash and calcium chloride plant at Winnington in the UK. It also decided to mothball its premium ash plant in Magadi, Kenya. Tata Chemicals also put its fertiliser business on the block, but there wasn’t enough interest from potential buyers.
In response to specific questions from ET, Mukund Rajan, Member – Group Executive Council and Brand Custodian,
Compiled by : ETIG Database
its making soda ash and calcium chloride plant at Winnington in UK in December 2013. It also mothballed its premium ash plant in Magadi, Kenya
to find the right man to take over as head of Tata Motors. Guenter Butschek, former Airbus COO, was hired for the role in mid-February
was brought into head Indian Hotels in 2014 and has put in place a bold new asset-light strategy Tata Sons, says tough decisions like the upcoming sale of Tata Steel’s UK operations is merely good governance.
“With the business context having radically changed, Tata Steel is obliged to examine all strategic options. That is precisely what good governance requires — you owe it to all your stakeholders to try your best, and to explore choices and options when fundamentals change in the environment around you,” he says.
Tata Steel acquired Corus (now its UK assets) in 2007. But the steel business in Europe wasbuffetedbyaseriesofcrisesnobodycould have predicted in 2007. “We demonstrated our commitment to improve the international competitiveness of the UK operations ofCorusthroughsignificantinvestmentover a number of years, seeing off the global financial crisis, the Eurozone slump, and increasingly onerousUKenergypricesand business costs. But business conditions have further deteriorated — the company has faced in recentmonthswhatmanyhavedescribedasthe perfect storm,” says Rajan.
“The proposed changes are a natural and appropriate set of changes in response to the changed global economic conditions,” says Krishna G Palepu, professor at Harvard Business School. He has tracked the group closely for a long time. “Also, it is natural to make a mid-course correction after several years of rapid growth and experimentation. Moreover, these changes are only part of the story at the Tata Group. The group continues to make significant new bets (Vistara, for example), and focus on innovation and growth as well,” he adds.
These are not grand consultant-led decisions nor are they pushed from the very top, Tata group officials say. “Most of the big decisions are in collaboration with the CEO and top management of the company including the board. “Mistry empowers the board when it comes to big decisions,” said a board member in on of Tata group’s B2B ing from him again and again. These two words shape all business decisions. For example, at a recent group executive meeting, Mistry urged CEOs of group companies to create capital for growth.
“Profitability is clearly a necessary ask from the management teams; without profits, we would not be able to sustain our businesses, and make the investments we do in the communities,” says a Tata Sons spokesperson. “In such a context, there is no such thing as only some companies or lines of business being core. We would certainly expect all our businesses to be profitable in a sustainable way.”
Rajan says the group’s strategic goal is sustainable, profitable growth. “This requires both top line and bottom line growth and growth across the world, including in India. We will support our existing businesses, and enter new lines of business where we see opportunities for sustainable, profitable growth.”
Mistry is bringing about this razor sharp focus on profitability and sustainability by engaging with and empowering leaders. “He has a fine set of young leaders across businesses with whom he is sowing seeds for future growth. “Teams within the organisation are being encouraged to take risks to innovate to foster a culture of entrepreneurship,” says Rajan.
Mistry is also pushing for a performance culture, encouraging CEOs to break hi-
In 2014, Tata Group announced plans to invest $ 35 billion in three years. This is the largest investment plan ever announced by the group. It has since begun making significant investments in defence, the digital space (an omni-channel marketplace, a digital health and wellness platform, and a big data analytics initiative). Its Vision 2025 is to be among the 25 most admired brands globally, with a market capitalization comparable to the 25 most valuable companies in the world.
“We fully understand that achieving our vision will not be easy. We live in a volatile and uncertain world, and the context in which business moves are made can repeatedly change,” says Rajan.
The strong resolve and pragmatic flexibility Mistry has demonstrated will be needed. Mistry was part of the Tata Chemicals board’s decision to put its fertiliser business on sale. But when buyers did not come forward, the company chose to withdraw the sale plan. “There was no point in having a distress sale,” said an official close to the development. “So while Mistry discourages the traditional approach that Tata companies had earlier of a bail out from Tata Sons, he is equally clear that there will be no desperate moves to sell either. There has to be economic viability for any plan with a long term view,” he added.
“The thing with Mistry is that he is really not afraid of legacy. He is trying to build on it,” says an ex Tata Sons official. “His eye is on the future, not the past.”