Natarajan Chandrasekaran took over as chairman of Tata Sons Ltd., the holding company of Tata Group, pledging to improve capital allocation and boost returns from the $100 billion salt-to-software Indian conglomerate.
The challenge for Chandrasekaran, or Chandra as heâ€™s known, will be to rekindle growth and revive Tataâ€™s weaker units after almost four months of boardroom turmoil that followed the ouster of his predecessor Cyrus Mistry.
â€œI will focus on three strategic priorities,â€ Chandra said in a statement on Tuesday. Leverage the groupâ€™s strength, improve operating performance in companies,â€œbring greater rigor to our capital allocation policies and deliver superior returns to our shareholders.â€
Tata, founded in 1868, named Chandra to take the helm after a feud between scion Ratan Tata and Mistry over the latterâ€™s strategy of paring back the empire Ratan Tata had built through more than a decade of acquisitions before handing the reins to Mistry. While Mistry looked for ways to pare the conglomerateâ€™s debt-laden sprawl, Chandra helped turn software maker Tata Consultancy Services Ltd. into a growth machine, boosting the companyâ€™s market value more than 10 times since 2009.
â€œThe Tata group has made some very ambitious acquisitions,â€ Mahendra Patil, managing partner at consultancy firm XMPUS Financial Services LLP, said. â€œBesides returns, even the acquisition price raises questions over the groupâ€™s strategy to allocate capital in an efficient way.â€ Tata Sons announced last month the appointment of Chandra, 53, who joined the Tata group in 1987 after obtaining a masters degree in computer applications from the Regional Engineering College in his home state of Tamil Nadu.
As Chandra started his day in Bombay House, Tata Groupâ€™s head office — where stray dogs lounge in the lobby of the restored heritage building in Mumbaiâ€™s original business district — investors will be looking to the man who transformed Tata Consultancy Services into the nationâ€™s most valuable company.
That performance may be critical for Tata. â€œGoing by Chandraâ€™s track record at TCS, I think his biggest focus will be to grow the group,â€ said Juergen Maier, a Vienna-based fund manager at Raiffeisen Capital Management, who oversees about $1 billion in assets including Tata Motors and Tata Consultancy shares. â€œFor companies like Indian Hotels and Tata Steel, Tata will have to rework their strategy as their overseas acquisitions were the problem areas, while the local businesses did well. Tata still has huge opportunities to grow in the coming years.â€
Hereâ€™s a look at some of the key challenges facing Tata Group units.
Indian Hotels, operator of the Pierre hotel in New York, has been paring debt by selling assets including a property in Boston and its stake of almost 6 percent in Belmond Ltd., owner of the 21 Club restaurant in New York and Hotel Cipriani in Venice.
This year, Indian Hotels is expected to report an annual profit after losing money in the previous four financial years. The sale of the Boston property led to a one-time loss of 1.03 billion rupees, the company said in a Feb. 3 filing.
In 2008, Tata Motors Ltd. bought the Jaguar and Land Rover luxury brands from Ford Motor Co. for $2.4 billion. Tata turned around the brands, helping boost revenue more than seven-fold between 2008 and 2015.
In the quarter ended December, Tata Motorsâ€™s profit plunged 97 percent after margins at its luxury Jaguar Land Rover unit narrowed and costs surged. The company is also contending with potential fallout from a proposed U.S. border tax on imported cars and Britainâ€™s withdrawal from the European Union.
The Jaguar Land Rover unit is vulnerable because it doesnâ€™t have factories in the U.S. and sells much of its U.K. output abroad. The domestic business in India continues to struggle amid competition from Maruti Suzuki India Ltd. and Hyundai Motor Co.
Japanâ€™s NTT Docomo Inc. has sought compensation for its stake in Tata Teleservices Ltd. as it tries to exit one of its worst overseas investments. In June, the London Court of International Arbitration ordered Tata Sons to pay $1.17 billion to NTT Docomo for breaching an agreement over the wireless venture.
The mobile phone business has been losing customers amid a price war thatâ€™s prompting Indiaâ€™s 11 carriers to consolidate. Reliance Jio Infocomm Ltd., controlled by Indiaâ€™s richest man, turned up the heat in September by introducing free calling and data services. Tata Teleservices has about 300 billion rupees of debt, according to a company filing.
In 2007, Tata Steel made one of Indiaâ€™s most expensive overseas acquisitions, buying Corus Group Plc. for $12 billion. Its fortunes soon went south, as Europe fell into a demand slump after the 2008 economic crisis and China flooded the market with additional output.
This month, Tata Steel announced that it had agreed to sell its U.K. specialty steels business to Liberty House Group for 100 million pounds ($124 million), as part of efforts to pare debt. The company has been seeking to sell or turn around its U.K. business after years of losses, and is in talks with Thyssenkrupp AG and other companies for a joint venture.