Three months into his new role as chairman of Tata Sons, Natarajan Chandrasekaran has recruited Saurabh Agarwal, head of strategy at Aditya Birla Group, as the group chief financial officer (CFO). The appointment was announced by Tata Sons on Monday. Agarwal has had stints at both Standard Chartered Bank where he spearheaded the bank’s corporate finance business and at DSP Merrill Lynch, where he was an investment banker.
In his short time with the Aditya Birla Group, Agarwal worked closely with the top management team to complete the Idea-Vodafone merger.
Given how most companies in the Tata Group are highly leveraged and saddled with assets that are not generating cash, Agarwal has his work cut out for him.
Former Tata Sons chairman Cyrus Mistry had ushered in financial discipline into many of the companies cleaning up balance sheets by taking impairments and selling businesses—acquired when Ratan Tata was chairman — that were unprofitable.
While Tata Steel’s European business — the erstwhile Corus — has shown some signs of a revival in the last couple of quarters, it has notched up Rs 34,000 crore of cumulative losses in the last five years.
Moreover, it remains highly indebted. Companies such as Tata Teleservices too have incurred huge losses over the years and shutting it down could cost as much as $5 billion.
Under Cyrus Mistry, who was ousted on October 24, 2016, capital investments were more prudent. In FY12, Tata Sons’ equity investments into group companies were smaller than the dividends it earned from them.
The trend continued for the next four years. The board of Tata Sons had, post Mistry’s removal, cited a drop in its dividend income as a measure of his under-performance and one of the reasons for his being replaced.
Agarwal, given his capital market experience, is also expected to play a role in reducing the cross-holdings in the group, which the company has several times said, is being looked at.
Welcoming Agarwal, Chandrasekaran said, “He brings deep capital markets knowledge and valuable cross-industry experience to this critical leadership role in the Tata group. His expertise will help us in driving rigour and synergy in capital allocation decisions, investment management as well as consolidation and optimisation of the group’s business portfolio.”