Tatas put Bombay House in order

The group is clear it would do its best to retain the iconic Taj Mansingh in New Delhi, which is coming up for auction soon

The biggest restructuring in the history of corporate India could well be underway as new Tata group chairman N Chandrasekaran aims to remove impediments at the $105-billion group. 

Ever since Cyrus Mistry was removed as chairman on October 24, 2016, Tata group has fought back valiantly by increasing stake in group companies, merging the loss-making telecom business with Bharti Airtel and hiving off Tata Steel Europe to a joint venture with Thyssenkrupp of Germany. 

However, the Diwali cleaning in Bombay House, the group headquarters, is far from over. “The group has done very well. It has got out of telecom and hived off the European steel business but a lot more needs to be done,” said the chairman of a large conglomerate, asking not to be named.

In the coming months, Chandra, as the chairman is fondly called, will have to take a call on how to turn around the passenger car division of Tata Motors and Tata Power’s Mundra (Kutch) plant, which is losing money on every unit of electricity sold. Indian Hotels, operators of the Taj group of hotels, is still undecided on what to do with its Sea Rock property in Mumbai. The building, which was demolished to construct a new hotel, has stalled due to lack of clearances. 

The group, however, is clear it would do its best to retain the iconic Taj Mansingh in New Delhi, which is coming up for auction soon.

For the group, the battle with Mistry came at a wrong time. The group, which made some wrong calls in its effort to become a global conglomerate, was unable to find a way out of “legacy issues”. Mistry was attempting to solve these at the time of his ouster. 

With Chandra, who had made his mark as chief executive officer of Tata Consultancy Services, being chosen as Tata Sons chairman, things started looking up. The mood among the group’s 700,000 employees changed with his arrival, and the future, they say, is “optimistic”. 

A year after Cyrus Mistry’s ouster, Chairman N Chandrasekaran has reduced cross-holdings, formed a JV between Tata Steel Europe and Thyssenkrupp and exited Tata Tele’s consumer mobile business

N Chandrasekaran

Chandra’s bold steps

Chandra’s first steps, after his appointment this year in February, was to meet various CEOs and board members of Tata group companies to seek their views on how to solve the issues raised by Mistry. Chandra also met independent directors — who had initially opposed Mistry’s removal from the boards — and apprised them about his plans. Most of them decided to back him to the hilt. “I will focus on three strategic priorities,” Chandra said in a statement as soon as he joined. “Leverage the group’s strength, improve operating performance in companies, bring greater rigour to our capital allocation policies and deliver superior returns to our shareholders.”

Chandra also decided to build an A-team by hiring industry veterans. He hired investment banker Saurabh Agrawal as group CFO, Shuva Mandal as group general counsel and investment banker Ankur Verma in  the chairman’s office with a “diverse portfolio”. 

The new team led by Chandra soon started delivering results. First, Tata Sons put cash in the books of operating companies by buying their stakes in other group companies. 

In September, Tata Steel announced the merger of its European business with Thyssenkrupp into a 50:50 joint venture (JV). Tata Steel would transfer 2.5-billion euros debt to the JV and cutting losses.  

The next month, the spotlight shifted to the loss-making Tata Teleservices, where the consumer telecom business was merged with Bharti Airtel for free. Tata also announced the enterprise business would be combined with Tata Communications, while the fixed line and broadband business would be merged with Tata Sky. “We’ll take the near-term pain to gulp down the poison and finish it off and resolve it,” said Saurabh Agrawal.

The group also indicated that it would sell 51 per cent stake in its Mundra power project to Gujarat Urja Vikas Nigam for Rs 1 and turn around Tata Motors’ domestic passenger car and commercial vehicles businesses. While the group is selling loss-making businesses and restructuring others, it is also looking for new opportunities, which could include a bid for Air India as well.

NEW FACES

Saurabh Agrawal

Group CFO, Tata Sons
 

The former Merrill Lynch investment banker quit as Aditya Birla Group mergers and acquisitions (M&A) head to join Tata Sons in May this year as Group CFO, and managed to get rid of the money losing wireless telephony business by October. 

Shuva Mandal

Group General Counsel, Tata Sons 
 

Shuva Mandal was hired by Chandra as group general council in July, mainly to advice on the various M&As and sale of businesses planned by the group. Mandal, with 17 years of experience in the legal profession, has advised leading Indian companies, global private equity firms and Fortune 500 companies. With the legal tussle continuing between Tata Sons and Cyrus Mistry, Mandal would be expected to face the storm.

Banmali Agrawala

Head – realty, infrastructure, Tata Sons
 

Hired from GE, where he worked as its president & CEO of South Asia, Agrawala is not a stranger to the Tatas, having served on the Tata Power board earlier. He joins Tata Sons to head its realty and infrastructure vertical, which covers Tata Power, Tata Realty, Tata Housing and Voltas.

Rajiv Sabharwal

CEO, Tata Capital
 

Financial services is one business that hasn’t gone anywhere for the Tata group. Sabharwal, a banking veteran from ICICI Bank and more recently private equity firm True North, will lead the group’s financial services business. The company made losses on its loans to Chennai-based entrepreneur C Sivasankaran. 

Rajesh Gopinathan

CEO & MD, TCS
 

One of the first appointments made by Chandra was to make former CFO Rajesh Gopinathan his successor at TCS — the group’s profit-generating machine. 

Puneet Chhatwal

MD and CEO, Indian Hotels
 

Chhatwal, who joined Indian Hotels from Germany’s Steigenberger Hotels, where he was CEO, has the onerous task of turning around the Taj group of hotels.

Legacy issues: Status check

Tata Sons:  Both Tata Sons and Tata Capital decided to write off dues of Rs 2,000 crore from Chennai-based entrepreneur C Sivasankaran. Tata Sons also decided to convert itself into a private company, thereby reducing public scrutiny. Cyrus Mistry’s cases against the company and its directors are pending before the National Company Law Tribunal. 
 

Indian Hotels: Indian Hotels has still not made up its mind on what to do with its Sea Rock (Mumbai) property. The building was demolished to make way for a new hotel but has not received permissions from government. The group plans to make an aggressive bid to retain Delhi’s Taj Mansingh which is coming up for auction.

Tata Power: The company invested Rs 18,000 crore in the Mundra (Gujarat) power plant, based on imported coal. With the Supreme Court refusing to pass on the increased cost to customers, the company has offered to sell 51 per cent in the 4,000-Mw plant to Gujarat Urja Vikas Nigam for Rs 1. If the accepted, the company would retain 49 per cent.

Tata Teleservices: The group merged its consumer mobile business with Bharti Airtel for free. Of the residual businesses, the group plans to combine the enterprise business with Tata Communications and broadband/fixed phone business to Tata Sky. It would also retain 32 per cent stake in telecom tower firm Viom. Tata Sons has promised to repay bank loans.