Cyrus Mistry's to-fix list remains formidable

Indian Hotels, Tata Steel, Tata Teleservices, Tata Motors, Tata Power need some immediate attention of the Tata Group chairman

With quite a few Tata Group companies needing his attention for a permanent resolution of their problems, Chairman Cyrus Mistry has his hands full.

While Tata Steel’s European operations continue to face headwinds, the company’s efforts to sell long products could help restructure that business, though Europe continues to see a demand slowdown.

Tata Teleservices, the group’s telecom venture, is another challenge. For 2013-14, the unlisted firm posted a Rs 6,166-crore loss on revenue of Rs 10,452 crore. The continued losses prompted Japanese partner NTT DoCoMo to sell its 26.5 per cent stake to the Tatas for Rs 7,200 crore, about half of what it had paid for the stake in 2009.

The company, which operates on a dual-technology platform — GSM and CDMA — has failed to turn profitable. In terms of subscribers, it hasn’t been ranked within the top five. “The group’s diversification efforts through the past decade have had mixed results,” says Dhananjay Sinha, economist and strategist at Emkay Global Financial Services. “So, there is a constant need to re-strategise business”.

On the domestic front, Tata Motors, which has seen demand fall for both commercial and passenger vehicles, presents a challenge. The company hasn’t had a managing director for about a year, since former head Karl Slym passed away in January. It is expected the trucks business will pick up with an upturn in the economy.

While the response to the company’s newly-launched sedan, Zest, has been good, more is needed to address competition, which has pushed it out of the top three slots.

Tata Power and Indian Hotels are two other companies facing headwinds; these have reported consecutive losses. Tata Power’s request to increase rates for the power produced at the Mundra ultra-mega power project is stuck with regulators. The company is recording losses, as its imported coal-based plant was hit when the Indonesian government unexpectedly increased the price of the fuel.

In the past decade, Indian Hotels has bought costly assets in key source markets, including the US, which led to stretched finances and a debt-equity ratio of 1.3. Now, the company has 16 hotels in these markets, but high interest costs are eating into profitability at a time when the economic downturn has affected rentals. This year, the company roped in Hyatt’s Rakesh Sarna as managing director, following the sudden exit of Raymond Bickson from the post.

“Efforts to address the challenges are visible on most fronts, but one cannot expect the resolution of these issues in such a short span of time,” says the head of a bulge-bracket investment bank that had advised the group earlier.