In­dia’s Tata in race against time to save global im­age

Kuwait Times - - BUSINESS -

In­dia’s largest con­glom­er­ate Tata faces one of the most tur­bu­lent pe­ri­ods in its long his­tory after its shock de­ci­sion to sack its chair­man, an­a­lysts say, as it bat­tles to save its global rep­u­ta­tion. Sev­enty-eight-year-old pa­tri­arch Ratan Tata dra­mat­i­cally re­turned to the helm of the fam­ily busi­ness this week after he be­came up­set at the di­rec­tion Cyrus Mistry was tak­ing the sprawl­ing group.

The abrupt sack­ing Mon­day, out of char­ac­ter for the 148-year-old or­ga­ni­za­tion, has plunged the $100 bil­lion con­glom­er­ate into ac­ri­mony and high­lighted its di­vi­sions at a time when it faces ma­jor fi­nan­cial chal­lenges. “Tata group is go­ing through an eco­nomic cri­sis and most of its busi­nesses are not per­form­ing well,” G Chokkalingam, man­ag­ing di­rec­tor at Mum­bai-based Equinomics Re­search & Ad­vi­sory Pvt, told AFP.

Tata Group’s rev­enue slipped 4.6 per­cent for the fi­nan­cial year ended March to about $103 bil­lion. One of its worst per­form­ers is Tata Steel, which last month re­ported a quar­terly net loss of al­most 32 bil­lion ru­pees (US$475 mil­lion), as it winds back its Euro­pean op­er­a­tions. The com­pany an­nounced ear­lier this year that it was sell­ing its loss-mak­ing Bri­tish as­sets ow­ing to a global over­sup­ply of steel, cheap Chi­nese im­ports into Europe, high costs and cur­rency volatil­ity. Tata Mo­tors’ prof­its have also slowed be­cause of fall­ing sales of Jaguar Land Rover (JLR) in China as the coun­try’s econ­omy stut­ters, while IT be­he­moth Tata Con­sul­tancy Ser­vices is suf­fer­ing from cau­tious client spend­ing in the face of an uncer­tain global eco­nomic out­look. “It was not any lead­er­ship prob­lem but eco­nomic fac­tors that played out in oust­ing Mistry,” said Chokkalingam, sug­gest­ing he had un­fairly lost his job over cir­cum­stances out of his con­trol. An out­stand­ing pay­ment of al­most $1.2 bil­lion to Ja­pan’s NTT Do­como is also tar­nish­ing Tata’s rep­u­ta­tion abroad. “It could take a new leader 10 years to get con­trol of things and main­tain Tata Group’s im­age,” Ma­hesh Singhi of cor­po­rate ad­vi­sory firm Singhi Ad­vi­sors told AFP: Tata led the com­pany for 21 years dur­ing ar­guably its most suc­cess­ful pe­riod, in­creas­ing the group’s rev­enues from around $6 bil­lion to $100 bil­lion as he made a string of big-name pur­chases.

While he trav­elled the globe buy­ing the likes of JLR, Bri­tain’s Tet­ley Tea and An­glo-Dutch steel firm Corus, Mistry has fo­cused on re­duc­ing the sprawl­ing group’s $30 bil­lion debt level by sell­ing as­sets and re­fi­nanc­ing loans. Ratan Tata is said to have be­come in­creas­ingly frus­trated by 48-year-old Mistry’s fo­cus on di­vest­ments, be­liev­ing the group should hold on to its as­sets for the long term and not re­duce its global reach. But Chokkalingam stresses that Mistry’s de­par­ture should not mark the end of his more pru­dent ap­proach, say­ing Tata has no op­tion but to re­duce its size to bal­ance the books.

“With no re­turn to the par­ent com­pa­nies in re­cent times due to a weak eco­nomic out­look, di­vest­ment has be­come a com­pul­sion. Tata Sons had to ei­ther con­tinue with losses or re­struc­ture their busi­nesses,” said the an­a­lyst. Mistry be­came the first chair­man from out­side the im­me­di­ate Tata fam­ily when he suc­ceeded Ratan Tata in De­cem­ber 2012. His coro­na­tion was care­fully planned, with the group an­nounc­ing Mistry as heir a year be­fore­hand.

He was only the sixth chair­man in the his­tory of the con­glom­er­ate, which was formed in 1868, and an­a­lysts say the un­cer­e­mo­ni­ous man­ner in which Mistry was de­posed speaks of a wider malaise. “It high­lights a lead­er­ship vac­uum,” cor­po­rate gov­er­nance ex­pert Shri­ram Subra­ma­nian of InGovern Re­search Ser­vices told AFP. Mistry’s sud­den dis­missal fol­low­ing a vote at a rou­tine board meet­ing has un­sur­pris­ingly been ac­ri­mo­nious. — AFP

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