Tata’s Chandrasekaran pledges to improve capital allocation policies
mumbai — Natarajan Chandrasekaran took over as chairman of Tata Sons Ltd, the holding company of Tata Group, pledging to improve capital allocation and boost returns from the $100 billion salt-to-software Indian conglomerate.
The challenge for Chandrasekaran, or Chandra as he’s known, will be to rekindle growth and revive Tata’s weaker units after almost four months of boardroom turmoil that followed the ouster of his predecessor Cyrus Mistry.
“I will focus on three strategic priorities,” Chandra said in a statement on Tuesday. Leverage the group’s strength, improve operating performance in companies, “bring greater rigor to our capital allocation policies and deliver superior returns to our shareholders.”
Tata, founded in 1868, named Chandra to take the helm after a feud between scion Ratan Tata and Mistry over the latter’s strategy of paring back the empire Ratan Tata had built through more than a decade of acquisitions before handing the reins to Mistry. While Mistry looked for ways to pare the conglomerate’s debt-laden sprawl, Chandra helped turn software maker Tata Consultancy Services Ltd into a growth machine, boosting the company’s market value more than 10 times since 2009.
“Going by Chandra’s track record at TCS, I think his biggest focus will be to grow the group,” said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management, who oversees about $1 billion in assets including Tata Motors and Tata Consultancy shares. “For companies like Indian Hotels and Tata Steel, Tata will have to rework their strategy as their overseas acquisitions were the problem areas, while the local businesses did well. Tata still has huge opportunities to grow in the coming years.”
Tata Sons announced last month the appointment of Chandra, 53, who joined the Tata group in 1987 after obtaining a masters degree in computer applications from the Regional Engineering College in his home state of Tamil Nadu.
As Chandra started his day in Bombay House, Tata Group’s head office, investors will be looking to the man who made Tata Consultancy Services the nation’s most valuable company.
Here’s a look at some of the key challenges facing Tata Group units.
Indian Hotels
Indian Hotels, operator of the Pierre hotel in New York, has been paring debt by selling assets including a property in Boston and its stake of almost six per cent in Belmond Ltd, owner of the 21 Club restaurant in New York and Hotel Cipriani in Venice. Under Ratan Tata, it had tried to buy control of the company, formerly called Orient-Express Hotels Ltd, in 2012. It gave up the chase in 2013 under Mistry. This year, Indian Hotels is expected to report an annual profit after losing money in the previous four financial years. The sale of the Boston property led to a one-time loss of 1.03 billion rupees, the company said in a February 3 filing.
Tata Motors
In 2008, Tata Motors Ltd bought the Jaguar and Land Rover luxury brands from Ford Motor Co for $2.4 billion. Tata turned around the brands, helping boost revenue more than seven-fold between 2008 and 2015. In the
I think his [Natarajan Chandrasekaran’s] biggest focus will be to grow the group Juergen Maier, Fund manager, Raiffeisen Capital Management
quarter ended December, Tata Motors’s profit plunged 97 per cent after margins at its luxury Jaguar Land Rover unit narrowed and costs surged.
Tata Teleservices
Japan’s NTT Docomo Inc has sought compensation for its stake in Tata Teleservices Ltd as it tries to exit one of its worst overseas investments. In June, the London Court of International Arbitration ordered Tata Sons to pay $1.17 billion to NTT Docomo for breaching an agreement over the wireless venture.
The mobile phone business has been losing customers amid a price war that’s prompting India’s 11 carriers to consolidate. Reliance Jio Infocomm Ltd, controlled by India’s richest man, turned up the heat in September by introducing free calling and data services. Tata Teleservices has about 300 billion rupees of debt, according to a company filing.
Tata Steel
In 2007, Tata Steel made one of India’s most expensive overseas acquisitions, buying Corus Group Plc for $12 billion. Its fortunes soon went south, as Europe fell into a demand slump after the 2008 economic crisis and China flooded the market with additional output. — Bloomberg