Kala Vi­jayragha­van

The Economic Times - - Special Feature -

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.”

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