YEAR AFTER MISTRY OUSTER, BUSINESS AS USUAL AT TATA GROUP
GROWTH MOVE After Mistry‘s ouster as chairman, the aim is to foster ‘one’ approach by firms
MUMBAI: A year after a terse statement from the headquarters of the $103 billion (around ₹6.7 lakh crore) Tata group triggered an unprecedented crisis, it’s business as usual at India’s oldest and largest conglomerate.
The legal war on multiple fronts between group holding firm Tata Sons Ltd and Cyrus P Mistry, who was fired as chairman by its board on October 24, 2016, is on the back-burner. Under new chairman N Chandrasekaran, the strategy is to create clusters that will provide focus and drive growth even as there’s a clear aim to foster a “One Tata” approach by firms.
Simultaneously, Chandrasekaran is making rapid strides on the operational front to resolve some of the issues that had been a drag on the group’s performance.
Since the crisis unfolded, market capitalisation of listed Tata group companies has gone up 2.47% as of date, to ₹8.93 lakh crore, according to data from Capitaline. During the same period, the market cap of the Sensex has gained 15.36%.
After taking charge on February 21, Chandrasekaran hit the ground running. He started off by giving his stamp of approval to a legal settlement with Japanese partner NTT DoCoMo in his first board meeting on February 21. Formation of a team that could steer the restructuring of group firms was next on his agenda.
Indeed, from disentangling the complex cross-holdings of group companies to taking calls on troubled debt-ridden units such as Tata Teleservices Ltd and Tata Steel Europe, to executing the strategy that involves simplifica- tion and streamlining of operations — there hasn’t been a dull day for Chandrasekaran’s core team, comprising Saurabh Aggarwal, group chief financial officer of Tata Sons; and ex-Bank of America Merrill Lynch banker Ankur Verma, who is in charge of the group’s mergers and acquisitions strategy.
The group is looking to drastically prune the number of companies in its portfolio and take tough calls on non-performing, debtladen firms and bring greater financial discipline, Chandrasekaran told CNBC-TV18 in an interview on October 9. The plan that involves rationalisation of the portfolio from the current 110 to a maximum of up to five, six or seven will help the 150-year-old conglomerate that boasts an expansive presence, from steel and automobiles to technology and infrastructure, as it seeks to be more agile and strengthen its presence in existing segments.
“The Group under Chandrasekaran seems to be working towards better capital allocation by consolidating their myriad businesses. This should hopefully deliver greater shareholder returns in future,” said Shriram Subramanian, co-founder and MD of proxy advisory firm In Govern Research.
Challenges do remain, related to making the group’s three-tier structure that comprises Tata Trusts, Tata Sons and Tata group companies, more robust and accountable, and bring in greater transparency.
“The group, under Chandra, seems to be headed in the right direction,” said Amit Tandon, MD at proxy advisory firm Institutional Investor Advisory Services. While Chandrasekaran will be able to do a few things relating to group’s operations quickly, others like making changes to the three-tier structure to ensure all interests are protected, will take some time, he said.
A Tata Sons spokesperson declined to comment for this story. Mistry’s office also declined to comment.
Some Tata group observers view what Chandrasekaran is doing as a continuation of what Mistry started, albeit at a faster pace, as he has the benefit of learning from his predecessor.
“I would say nothing that Chandra is doing is not there in the strategy document—be it related to merger of Tata Steel Europe with Thyssenkrup, simplifying the cross-holding or turning around the passenger vehicle business,” said Nirmalya Kumar, professor of marketing at Lee Kong Chian School of Business, Singapore Management University, and a former group executive council member at Tata Sons, who left with Mistry. Others, however, differ. “Cyrus and his team were thinking but not taking decisions. That’s a big change that I find now; tough, hard decisions are being taken and implemented. Chandrasekaran is moving on his own. It’s not that somebody is all the time looking over his shoulder. Much like how Ratan Tata interacted with JRD Tata,” said a Tata group official, declining to be identified.
As part of the consolidation strategy, Chandrasekaran has adopted a cluster approach for the group companies. The plan is to create five-seven clusters, besides the three behemoths: Tata Consultancy Services Ltd, Tata Motors Ltd and Tata Steel Ltd. Different entities serving the same function will be merged to create a cluster of companies around infrastructure, defence, consumer goods, finance and travel (to cover civil aviation).