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Captain at the crunch

Arranging cash for Corus during the boom was easier than managing liquidity in the crisis that followed. Thankfully, Tata Steel had the right man in the right place-at all times.

Suman Layak | Print Edition: May 2, 2010

Very close to the office of Tata Steel's Group CFO Koushik Chatterjee in Bombay House-the headquarters of the Tata Group-hangs an M.F. Husain painting from the Durga series. And inside his chamber, on a wall beside his seat, there is another Durga-by Chatterjee's seven-anda-half-year-old son, Anirudha. The goddess, with her 10 hands, slaying the buffalo-demon Mahishasura, best symbolises the multitasking that Chatterjee has been doing for the past three years.

Successfully Managing the Global Crisis (Large Company)

KOUSHIK CHATTERJEE, CFO/ Tata Steel

  • Background: ICAI Fellow; Joined Tata Steel in 1995; VP, Finance, Tata Steel (2004-2007). Group CFO since 2008.
  • Winning move in 2008-09: Raising capital ahead of requirement and then managing the crisis through management of liquidity.
  • Challenge ahead: Managing a multi-speed organisation where different units are moving with different priorities.
  • Most likely to be heard saying: "Sometimes you need to raise money when you don't need it."
Weapons, blessings and the lotus in different hands-the nurturing mother and the conqueror of evil-Durga is the original multi-tasker. Chatterjee's words will make the analogy apparent: "Imagine an engine, where different parts are moving at different speeds, in different directions, and yet we have to reach the destination together on time. That is how we are working now." Tata Steel has to handle the hunger for growth capital in India and at the same time invest in restructuring its operations in Corus in Europe.

Then, there are the Southeast Asian and ASEAN operations that need constant performance enhancement and maintenance. One example will explain this challenge: In 2008-09, whilst the Indian operations of Tata Steel saw a capacity utilisation of more than 100 per cent, for Corus it was down by almost 40 per cent.

Those three different priorities of its businesses often force the Tata Steel group to create different financial strategies: It had to manage liquidity, multiple currencies in a $30-billion turnover global company and balance sheet risks and yet find money for growth in a "capital-starved world," as Chatterjee puts it. And he feels this is tougher than arranging for cash for the Corus acquisition-for in 2006 and 2007 life was much easier for CFOs.

Tata Steel has announced capital expenditure of Rs 40,000 crore in India in the next five years, of which Rs 8,000 crore is earmarked for 2010-11. In 2009, the Tata Steel Group also booked a restructuring cost of almost $1 billion (Rs 4,500 crore at current rates) for its European operations, which was largely severance pay for job cuts and inventories marked down to market value. It shed almost 5,000 jobs in the UK and The Netherlands in the last 15 months.

Even as the company invested in India, it took help of the short-term voluntary unemployment scheme of The Netherlands' government in 2009 as part of a national stimulus programme. In late 2008, Corus also sold off the last of its aluminium smelters. Tata Steel is also investing $114 million in its European operations to improve its supply chain-this is expected to lead to savings of $100 million a year. In 2007, Tata Steel raised more than Rs 9,000 crore through a rights issue; two years later it raised $500 million through an issue of global depository receipts (GDRS), and in the process got listed on the London Stock Exchange.

CFO MANTRAS

  • Global companies must have the processes to capture global risks, and the resources to manage them.
  • Learn to grow (one operation) and restructure (another) at the same time.
  • Learn to raise money when there's not much of it around.

 

The GDR issue coincided with Corus' toughest phase, which forced Tata Steel to report a consolidated loss of Rs 2,719 crore for the second quarter of 2009-10. The company has also tied up financing for its three million tonne expansion programme in Jamshedpur, which is in excess of $3 billion (Rs 13,500 crore).

Says Chatterjee: "As a global organisation we have to be aware and ready for global risks. We must have the processes and radars to capture the risks and beyond that we have to know how to best manage them." He feels that to play his role well he needs to go well beyond the defined roles of finance, where proactive financial communication becomes very important.

"Earlier we used to communicate only what was required. Now we are constantly talking to customers, investors and lenders." Chandrani De, an analyst who tracks Tata Steel for Ambit Capital Pvt Ltd, points out that effective communication helped Tata Steel get high-quality investors for its GDR issue. Apart from communication, Chatterjee feels that working capital management and controlling how capital should be spent are key priorities.

As the CFO of Tata Steel, Chatterjee has filled the shoes of Ishaat Hussain, who moved from the role of Executive Director, Finance, at Tata Steel in 2000, to that of Finance Director of Tata Sons. Chatterjee has been with Tata Steel right through its string of acquisitions, starting with Nat Steel of Singapore in 2004. And from then on the shoes just kept getting bigger and bigger till Chatterjee found himself at the helm of finances of a multinational in 2008 when he was designated the Group CFO.

BT's CFO awards have honoured him twice before and he has been featured in BT's annual list of Hottest Young Executives. Prahlad Shantigram, the global head for mergers and acquisitions at Standard Chartered Bank, had worked closely with Chatterjee while arranging the financing for the $13.7-billion Corus acquisition. He says: "I find Koushik to be an extremely well-rounded CFO with a grasp of a broad spectrum of corporate issues, a strong sense of 'value' and a global outlook. He demonstrates enormous maturity in his dealings and is a good people person. He has achieved a lot very quickly."

And he's just 41!

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