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Tata Sons may not be a bed of roses for N Chandrasekaran

However, while the position of chairman of Tata Sons is a significant promotion, it is unlikely to be a bed of roses for Chandra. For one, he will now be in charge of turning around the Group, which has a number of bad companies, legacy problems and new ventures losing money.

twitter-logo Prosenjit Datta   New Delhi     Last Updated: February 16, 2017  | 09:08 IST
Tata Sons may not be a bed of roses for N Chandrasekaran
N Chandrasekaran

The news was not exactly unexpected. For a week or so, several people representing the Tata Group had been coyly hinting that the new chairman of Tata Sons had been all but decided and the announcement would be made very soon, much before the deadline of three months that Ratan Tata had set while taking charge as interim chairman.

N Chandrasekaran, MD and CEO of Tata Consultancy Services, was anyway one of the front runners. There were two candidates from within the group who were considered strong contenders in the race to become the new chairman - Chandra himself and Ralf Speth, the CEO of Jaguar Land Rover. Both men had been elevated to the board of Tata Sons shortly after the removal of Cyrus Mistry as the chairman. It was a clear signal that they were in the running, though there were other names being bandied about as well, including that of Noel Tata and also Pepsico chairperson Indra Nooyi.

Chandra and Speth were the front runners because they were running the most profitable parts of the Group anyway. Chandra's TCS has been the growth engine for the Tata Group, and Speth, after being appointed as CEO of Jaguar LandRover had turned it into the other great profit-engine for the group.
The rest of the Tata Group companies were not doing great, and there were some which were losing money hand over fist. In fact, if you take away TCS and Jaguar LandRover from the Tata group today, you are left with a bunch of mediocre companies.

Chandra took over TCS when it was superbly profitable and fast growing, but smaller rival Infosys was often considered the bellwether IT firm. After Chandra took charge, TCS left Infosys well behind and became the company to watch in the Indian IT services sector, both for its revenue growth rates as well as its ability to protect profits while increasing revenues. Of late, TCS had been growing slower than expected - but remember the expectations are very high. By any parameter, TCS is a company that has been performing superbly in good conditions and bad.

However, while the position of chairman of Tata Sons is a significant promotion, it is unlikely to be a bed of roses for Chandra. For one, he will now be in charge of turning around the Group, which has a number of bad companies, legacy problems and new ventures losing money. Some of the problems of the Tata Group came into limelight in the Cyrus vs Ratan Tata war. Tata Steel UK still remains a problem and the Docomo affair is yet to be resolved. The two airlines are still losing money. Other businesses - from Indian Hotels to Tata Chemicals - are also grappling with their own problems.

The Tata Group is a conglomerate of very disparate companies in extremely different businesses and for Chandra, it will be a steep learning curve. On the other hand, he probably knows the group dynamics inside out. He shares a good relationship with Ratan Tata and the other members of the Tata Sons board. But he will also be under intense scrutiny because quick results will be expected from him. Moreover, he will have to manage through the distraction of the messy spat going on between Ratan Tata and Cyrus Mistry, and also between Nusli Wadia and Ratan Tata.

Moreover, given the size of the Tata Group and its many problems, showing the kind of results that his shareholders in TCS have been used to will be a difficult task, at least in the short run. But as the search committee which chose him might have realised, he probably has the highest chances of success in turning around the Group's fortune.

 

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