Repairing Tata brand, fixing legacy hotspots key challenges for Chandra

New chairman will have to focus on relations of companies with Tata Sons, Tata Trusts

N Chandrasekaran, popularly known as Chandra, has a long list of challenges as he takes over as Tata Sons chairman. These include improving relations of operating companies with Tata Sons and Tata Trusts, and also with independent directors of group companies, which touched a new low in the recent past. 

He will also have to sort out legacy hotspots that have adversely impacted the group’s financials. The new chairman will have to take steps to repair the Tata brand that was damaged because of allegations of corporate governance shortfalls made by Cyrus Mistry, who was ousted in October last year. 

Chandra will also have to fight the ongoing legal battle with Mistry and his family firms.

“One of the first priorities of the new chairman would be to take the independent directors into confidence. Many had supported Mistry and a few, such as Analjit Singh, even resigned, citing lack of corporate governance. Chandra will have to take them into confidence,” said a director on the board of Tata group companies.

How the new chairman handles the old guard and friends of group patriarch Ratan Tata will also be watched closely. Mistry had claimed one of the prime reasons he lost his job was because he had antagonised some of Tata’s friends, including Chennai-based entrepreneur C Sivasankaran and Mehli Mistry. 

“The new chairman will have to make sure that he takes everyone on board with him and does not step on anyone’s toes,” said a Tata director. 

The Tata Sons chairman will take over as the chairman of group companies that are facing different challenges. While TCS would continue to remain the group’s cash-generating machine for years to come, investors of the Tata group companies would like to see a proper turnaround strategy of Tata Steel. Tata Steel Europe has lost close to Rs 70,000 crore of Tata Steel’s funds since the acquisition in 2007.

Another call Chandra will have to take is on the telecom business, which is continuously losing money. He will have to resolve the dispute with Docomo, which entails a $1-billion settlement. Under Mistry, the group had initiated talks with Vodafone for a merger, which did not culminate into a closure.

Indian Hotels (IHCL), the company that operates Taj hotels, will be another key challenge for the new chairman, as it is not only losing money from its international properties but is also sitting on a huge plot of land at Sea Rock, Bandra in Mumbai. Chandra will also have to take the IHCL board into confidence, as all independent directors had gone against Tata Sons in their support for Mistry soon after he was ousted as Tata Sons chairman.

Another pain point would be Tata Power, which had bid aggressively for the Mundra project based on low-priced Indonesian coal. As regulations changed, losses in 2013-14 touched Rs1,500 crore. 

Mundra constitutes Rs18,000 crore of capital employed, or around 40% of the overall capital employed of Tata Power, which had substantially depressed the return on capital for the firm. The power company will be a key challenge for Chandra, a veteran of Tata group since 1987.