Business Today

Tough Journey

New Tata Group boss N. Chandrasekaran has inherited legacy hotspots that would require him to deliver results, yet tread carefully.
By Nevin John   Delhi     Print Edition: February 12, 2017
Tough Journey

Ousted Tata Group boss Cyrus Mistry has had a warm relation with the newly-elected Chairman N Chandrasekaran for the past several years. Despite that, a day before the announcement, Mistry shot off an angry letter to his fellow board members at Tata Sons questioning the legality of his appointment.

Mistry will be one among many whom Chandrasekaran will have to deal with, at least, in the initial days, including Ratan Tata, Nusli Wadia, retail shareholders, whistle blowers and even British Prime Minister Theresa May.

Mistry has already levelled a series of allegations - fraudulent transactions, unethical practices and conflict of interest - against the Tata Group and his predecessor Ratan Tata. He has questioned Ratan Tata's investment decisions and losses caused by these 'legacy hotspots', which include decisions regarding the overseas assets of Indian Hotels, the Nano, Tata Steel Europe, Tata Power's Mundra project, Tata-Docomo and the group's aviation joint ventures. He has warned the Tata Sons board and trustees of a potential $18-billion writedown.

As the groups Chairman, Chandrasekaran will now have to fight these allegations legally - Mistry's two private investment companies have already moved The National Company Law Tribunal - and clear the taint on Tata by turning around the sick assets.

At the same time, he will have to be cautious of not repeating the mistakes Mistry had made during his stint that led to his ouster. He will also have to keep Ratan Tata and other members of the Tata Trusts, including R. Venkataramanan, in the loop while taking major decisions. Tata had earlier linked the performance of Mistry to the fall in dividend earnings of the trusts. So, the performance of group companies will also be accounted for on Chandra's balancesheet.

Another pair of keen eyes watching Chandrasekaran's performance would be that of Nusli Wadia, who lost his directorships to the Tata-Mistry battle. Wadia is now fighting a criminal defamation suit against Ratan Tata. Therefore, Chandrasekaran will also have to be careful while dealing with Wadia group companies as well as the Shapoorji Pallonji group. In addition, he will have to handle the agitated retail shareholders, who largely supported Mistry in his battle, and the possibility of rising number of whistle blowers within the group.

However, the biggest challenges before Chandrasekaran would be to turn Tata Steel UK and the group's telecom business around. For that he would have to take up the issue of cheap steel imports into the UK with premier Theresa May, besides arriving at a settlement with NTT Docomo. Dealing with new US visa policies under President Donald Trump will be another challenge for Chandrasekaran that would see TCS acquire companies and aggressively hire locally to counter the restrictions.

There will certainly be no easy way out for the Tata Groups veteran. In fact, it will be tough for Chandrasekaran to find a middle path to success.~

@nevinjl

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