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The steel within

Tata Sons chooses an accomplished insider to steer the group after Mistry’s stormy exit. He has his task cut out

By: Editorial | Published: January 14, 2017 1:14:51 am

Tata Sons, the holding company of India’s top conglomerate, has moved quickly to nominate N. Chandrasekaran, a group veteran to head the diversified group, ending weeks of uncertainty following the acrimonious exit of the former chairman of the group, Cyrus Mistry, on October 24 last year. It had sparked off an unseemly war of words between Mistry and the group and boardroom battles, which have since landed in courts.

The decision to appoint Chandrasekaran is interesting on a few counts. For one, the choice of an insider, that too a professional, seems to be a clear recognition that the group prefers an insider, who is compatible with the values, ethics and the trust that many of the brands of the House of Tatas enjoy: Tata Sons had charged that this was missing when Mistry was at the helm of the group. Such a choice is also bound to provide comfort in terms of the future direction of the group to many senior professionals, who run several listed companies that manufacture products ranging from salt and fertilisers to power and automobiles: They may prefer growing with an insider than
losing out on a learning curve with a leader from outside the business house. More importantly, it would help to have a leader with a track record of building a company like Tata Consultancy Services (TCS), which has emerged as one of India’s most valuable companies in terms of market capitalisation, revenues and profitability. That by itself should earn respect for the new chairman. Soon after his elevation, Chandrasekaran admitted that the Tata group is at an inflection point and the new role entails huge responsibilities. He is right.

Foremost among the challenges he faces is repairing the damage to the group’s reputation in the wake of the battle between the group and Mistry and binding the group together, as he himself put it. There is, of course, the task of repairing the balance sheets of firms such as Tata Steel, which had to make huge write-offs after its overseas acquisition of Corus, and the stand off with its Japanese telecom partner, DoCoMo, which has now landed in court. The new chairman will need to set a new course for the group’s hospitality, automobile and aviation businesses and regain leadership positions in key segments, where many of these firms operate. He will have to be mindful of investor perception and shareholder value, which will need demonstrating improved corporate governance standards. Chandrasekaran’s passion is long-distance running. The skills and endurance it needs, and helps build, would come handy when the new executive chairman takes on the job of steering the group at a critical juncture.

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