Chandra’s journey: From an intern to Chairman

N Chandrasekaran - Bloomberg
Tata Group has put to rest speculation around its new chairman, by announcing the name of N Chandrasekaran for the top job. Chandra, as he is popularly called, had been the front runner ever since the exit of Cyrus Mistry on October 24.
He heads the most valuable company in the Tata portfolio – Tata Consultancy Services. But while TCS brings in nearly 70 per cent of Tata Sons’ revenues as well as profits, running the show at the salt-to-automobile conglomerate will be anything but easy.
Chandrasekaran, who was elevated to the board positions at the group’s holding company, Tata Sons, a day after Mistry was sacked, will have the twin tasks of turning around loss-making companies and improving financials of capital-guzzling businesses like Tata Power, Tata Steel and Indian Hotels.
Tata Steel and Tata Teleservices both posted losses of over ₹3,000 crore each last fiscal. And while the bulk of the group’s capital is employed in loss-making or financially struggling businesses such as steel, power, telecom and domestic passenger car business, the bulk of the profits are accounted for by TCS, Titan Company and Voltas.
Average gross debtThe group companies, excluding TCS, had average gross debt of ₹2.36 lakh crore last fiscal and it cost them ₹14,766 crore in interest cost. Most of the struggling companies continue to earn sub-par return on capital, making Tata Sons increasingly dependent on TCS to keep the group financially solvent. “This is largely due to the investment decisions made during the boom days of the pre-2008 global financial crisis, but the domestic and global business conditions are now entirely different. The group now also faces challenges from growth slowdown in TCS, which has single-handedly underwritten the group’s investment programme through hefty dividend payments in the last decade,” a Mumbai-based analyst said.
Tata Sons owns 74 per cent stake in TCS, the country’s largest dividend payer in the private sector.
Where it went wrongIn consumer-facing businesses such as domestic passenger cars and mobile telephony, the respective group companies have failed to build a brand or excite customers.
“Turning around TTSL will be an uphill task for the new chairman due to the company’s weak performance (company has never been profitable during its existence), its main mobile technology (CDMA) becoming obsolete, and it’s non-existence in the 4G space,” says Jayath Kolla, founder and partner at tech research firm Convergence Catalyst.
Besides, TTSL’s various telecom assets (submarine cable business, national long-distance business, wireless spectrum, towers business and mobile business) are non-aligned.
“It has a poor subscriber base and sub-industry average revenue per user. It will be extremely difficult to turn around TTSL, especially in the existing hyper-competitive environment,” Kolla added.
So, Chandra’s challenge will be to decide whether to make incremental investments in loss-making ventures and turn them around, or to book losses and exit from them. And equally important will be to resurrect brand Tata, which has taken a severe beating in the ongoing dispute with Mistry.
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