1. N Chandrasekaran anointed Tata Sons chairman, replaces Ratan Tata

N Chandrasekaran anointed Tata Sons chairman, replaces Ratan Tata

Panel unanimously picks ‘outsider’ (non-Tata, non-shareholder, non-Parsi) and ‘insider’ (30-year stint) as Tata Sons chairman

By: | Mumbai | Published: January 13, 2017 6:29 AM
Chandrasekaran will assume the position of chairman on February 21. (Photo: Prashant Nadkar) N Chandrasekaran will assume the position of chairman on February 21. (Photo: Prashant Nadkar)

Natarajan Chandrasekaran was on Thursday appointed executive chairman of Tata Sons, the holding company for the $100-billion conglomerate. He will replace interim chairman Ratan Tata, who took charge after the earlier chairman Cyrus Mistry, who was ousted as chairman on October 24. Chandrasekaran, who will assume the position of chairman on February 21, could be considered an “outsider” since he is not a member of the Tata family, or a shareholder of Tata Sons, or a Parsi. However, as corporate observers pointed out, he could also be seen to be an “insider”, having completed a near-three-decade-long stint in the group.

Chandrasekaran’s rise to what is undoubtedly the numero uno CEO position in corporate India is remarkable. The son of a lawyer, he rose from the ranks having joined Tata Consultancy Services in 1987 and never having been to management school.
Asked once about what it took to become a leader, the unassuming Chandrasekaran, or Chandra as he is popularly known, had remarked that his experience had been limited to being the leader of the class and captain of the badminton team.
His appointment, however, was widely anticipated especially since he had been appointed as director on the Tata Sons board on October 25.

Given his temperament, tremendous track record and the fact that he is just 53, most corporate CEOs believe he is the ideal candidate for the top job. “This is the best thing that has happened to the Tata Group,” HDFC chairman Deepak Parekh
observed after the announcement.

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Shareholders in Tata companies would be relieved at the appointment. Given the unseemly events at the Tata Group since October 24 when Mistry was removed as chairman of Tata Sons, and the subsequent acrimonious exchanges between Ratan Tata and Mistry, which severely tarnished the group’s reputation, appointing a person for the top job at the earliest was critical.

While Chandrasekaran is known to be a tough taskmaster, his style is one that encourages and empowers. In one of his interviews, the chief executive and managing director of TCS spoke of how he split the software company into 23 units with a view to creating a very flat but empowered structure. At the same time, he made it clear to the leaders of the units they were expected to work together. “We said the power of our company will be driven by how well they work together,” he had said at the time.

Under his watch, TCS grew by leaps and bounds with quarterly revenues having risen a stunning 300% between the time he took over and now; in the three months to December, the software major clocked a profit of $1 billion. In February 2013, TCS overtook Reliance Industries to become the country’s most valued companies. Indeed, during his tenure the market capitalisation of TCS increased by R3.4 lakh crore, which is more or less equal to the combined current market capitalisation of Infosys and Wipro.

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However, running a motley group of companies will be an altogether different challenge. Chandrasekaran, who is a long-distance runner, having participated in marathons across the world, has his task cut out for him.

Several of the larger companies in the Tata fold — Tata Teleservices, Tata Steel — are in very poor financial health and are highly leveraged. Some of the smaller companies such as Indian Hotels have been performing poorly thanks to a string of acquisitions.

It would be interesting, say corporate watchers, to see whether Chandrasekaran will be able to take tough decisions that would be in the interests of minority shareholders but may not be palatable to the members of the Tata Trusts that control Tata Sons.

Mistry, who was chairman for nearly four years, had claimed he had not been allowed to take some difficult decisions. He had observed also that shutting down or a fire sale exit of the Tata Group’s telecom business could cost as much as $5 billion.

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It’s possible, say experts, that Chandrasekaran may be able to convince the Tata Sons board of the need to take some tough calls since they would not want to run the risk of another tussle with the chairman, especially a professional.

Chandrasekaran said on Thursday that the responsibility of running the Tata Group was a huge one. He said he looked forward to working with different teams within the Tata Group not just to create shareholder value but to uphold the ethos that the group is known for.

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Challenges ahead

*Tata Steel’s European business continues to bleed with over `34,000 crore of cumulative losses in the last five years. According to ousted independent director Nusli Wadia, any return on the investments made in Europe looks a near-impossibility.

*Tata Motors’ market share in the domestic CV segment is down 1,340 bps in the last five years. Its share in the domestic PV market was less than 5% in FY16. According to ousted chairman Cyrus Mistry, any turnaround strategy for the company’s Indian PV business would require shuttering the loss-making Nano project, which may be difficult

*According Mistry, the shutting down or a fire sale exit of the Tata Group’s telecom business (TTSL) could cost as much as
$5 billion. The potential $1.2-billion payout to Docomo also remains an overhang

*Indian Hotels has reported losses in six out of the last seven years as a high debt overhang continues to weigh the company down. It has already sold several of its foreign properties at losses while the Sea Rock Hotel bought eight years back at a highly inflated price is still a long way off from becoming operational

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