Chandra’s first 100 days hint major gear shift for Tata

When N Chandrasekaran took charge as Chairman of Tata Sons in February, he was faced with multiple challenges, including loss-making businesses, skewed capital allocation and the fallout on brand Tata, post Cyrus Mistry’s exit.

Three months later, as Chandra marks his 100 days in charge of the $103-billion Tata Group, these challenges continue to be there, but the first winds of change are blowing across the group’s various businesses.

To start with, Chandra has put in place, a crack team that will help him deal with these problems. This includes investment banker Saurabh Agrawal, who was appointed as the group’s Chief Financial Officer. Agrawal will drive capital-allocation decisions, investment management, as well as consolidation. Chandra has also roped in Shuva Mandal, who will become Tata Sons’ Group General Counsel, replacing long-serving legal head Bharat Vasani.

“One of the first things Chandra did was to meet all the CEOs and MDs of group companies over dinner, and emphasise on holistic growth, taking leadership and leveraging the strengths of the Tata Group, including scale and talent across the group. If you see the decisions being taken by different Tata companies, it fits into this theme,” said a company executive.

While 100 days might be too early to track the changes in financial performance of the group’s key businesses, there are certain steps the largest revenue-generating companies are taking or likely to take under the new Chairman.

For instance, things look brighter for Tata Motors under Chandrasekaran. The company has begun a massive restructuring exercise, which is expected to cut about 1,500 middle-management jobs and reduce the flab within. The new structure will have five layers of white-collar workforce, instead of the current 14. This will help the company move faster to catch up against its Japanese and Korean competitors, which have in the last decade reduced Tata Motors’ market share by less than half.

Tata Steel has been able to wade through challenging times, both in India and Europe. The board’s guidance to bring down production cost, especially at the recently commissioned 3-million tonne plant at Kalinganagar, Odisha, and focus on increasing share of value-added products, is quite visible. The company has also not shied away from selling loss-making arms. It sold the entire stake in subsidiary Kalzip Guangzhou to Shanghai Qinheng International Trade for €5.2 million.

The other trouble spot — telecom — continues to be a laggard; but the change of tact by Chandra, in terms of agreeing to support the arbitration award to NTT DoCoMo, has ended a long-standing dispute. This will allow Tata Teleservices to either sell stake to a new strategic partner or exit the business altogether.

According to a Motilal Oswal report dated May 22, Tata Power is facing slower growth in the regulated business, risk of expiry of generation PPAs, competition in renewable energy and a highly leveraged balance sheet.

The most awaited is the sale in Indonesian coal mine PT Arutmin. The deal was announced three years ago, and revised from $510 million agreed earlier to $400 million in the end of 2016. It could help the company deleverage its balance sheet, analysts note.

“Monetising Tata Power’s solar assets will be another task for the company, considering it has acquired the 1,140GW renewable portfolio of Welspun Energy for an estimated ₹10,000 crore, pushing the company’s debt equity ratio to unhealthy levels,” analysts said.

Company insiders said Chandra already has his finger on the pulse of key issues facing the group, and a blue print is being made. “Over the next few months, one can expect some clear decisions that will put the group businesses in a position to take leadership. Chandra has loved these challenges when he was in TCS, and now at the helm of the group, he hopes some of his magic rubs off on the other group companies,” said an executive close to the leadership team.

(With inputs from Suresh Iyengar)

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