Shunning the spotlight since taking charge of the $100-billion Tata Group from Ratan Tata in December, 44-year-old Cyrus Mistry has focused on belt-tightening at a conglomerate left bloated by explosive growth under his predecessor.
Ratan was much more ... Strategic, more over-arching. Mistrys much more focused. The CFOs as well as the business heads are going to find it a much more rigorous exercise, a director who sits on multiple Tata company boards said.
In early February, at his first Tata Chemicals board meeting as group chairman, Mistry sat quietly as directors debated efforts to find synergies between interests dotted around the globe, from Wyoming to Gabon. Bringing the discussion to a halt, Mistry politely but firmly outlined that further consolidation was the only way forward.
He summed up the decision: This is what we are doing, a person present at the meeting said. Its quite clear he believes in the process of consolidation.
The last decade of Ratan Tatas tenure saw revenue grow ten-fold to $100 billion in the year ended March 2012, fuelled by acquisitions, including an ill-timed $13-billion deal for Anglo-Dutch steelmaker Corus and a more successful $2.3 billion purchase of luxury car brands Jaguar and Land Rover.
The group spent billions more on overseas assets like engineering firms, luxury hotels and coffee brands. Tata Chemicals alone bought, invested in or merged with eight companies between 2004 and 2011.
Mistrys job is to consolidate, three directors said, an effort focused on getting more from existing businesses, as opposed to shedding assets.
A very good numbers man, very hard-nosed in the way he approaches things, which is what is probably sorely required now, the first director said.
In his first five months on the job, Mistry has ordered his CEOs to tighten spending, and replaced oversight structures to give him greater influence over the running of the more than 100 group companies.
The impact is starting to be felt. This month Tata Steel announced a $1.6-billion write-down, an acknowledgement that it overpaid for Corus. Last month, its mobile phone unit, which ranks sixth in India by users, said it will surrender part of its CDMA mobile airwaves in most of its zones after the government asked carriers to pay surcharges. Each company will be doing it for himself... Thats the overall guidance and the strategic direction, another director said.
Besides Tata Chemicals, Mistrys to-fix list includes underperformers such as the domestic arm of Tata Motors, Tata Steel, and Tata Power, people familiar with the plans said.
All directors and executives who spoke to Reuters for this article declined to be identified due to the sensitivity of their comments. Mistry declined to be interviewed. In response to written questions, the Tata group noted it has invested more than $10 billion over the past three years and has already committed a similar amount towards expansion over the next two years, in India and globally.
Growth through both organic and inorganic means as well as consolidation, where appropriate, have been consistent themes for the past two decades, and we see no change in these twin themes looking ahead, a spokesman said.