As the drama at Bombay House, the head office of the Tata Group, winded down, a new leader was unveiled. It was the first time that the iconic Indian conglomerate was headed by a non-Parsi. After a bruising battle Cyrus Mistry had finally become history and in waltzed the Tata Group’s golden goose. The eggs laid by who have been instrumental in masking some of the glaring misadventures of several group companies. Natarajan Chandrasekaran, the former CEO of Tata Consultancy Services, the Tata Group’s golden egg, has finally arrived.
The marathon runner who is also an avid photographer is now the chairman of Tata Sons, the ultimate holding company of the Tata Group. He now heads a conglomerate whose combined revenues in 2015-16 were $103.51 billion, greater than the GDP of several small nations combined. In his mid-fifties, Chandrasekaran is now getting ready to run the marathon as he is poised to head the group for the better part of two decades.
The question though is, that by asking Chandra to relinquish his post at TCS, has the Tata group effectively killed the golden goose? TCS is single handedly accountable for bringing in 70% revenues of the Tata Group. Can Chandra replicate his success at TCS in the whole group? Several of the Tata group companies are saddled by debt which is a drag on the bottom line. Tata Teleservices commands a negligible share in the cut-throat Indian telco market, its position becoming even more untenable after the entry of Reliance Jio. The issues with Docomo are a prime example of the conflict between the Tata values and a ruthless business mindset. Tata Motors is held together by Jaguar Land Rover. Tata Steel is again facing issues after China flooded the market with cheap exports. A major issue though, that seems to be coming to the fore, is the election of Trump and the ramifications it will have on TCS. TCS may face greater uncertainty and might see its expenses rise and business opportunities dwindle as Trump focusses majorly on protectionism in the United States.
Chandra’s problems are not only in India but also overseas, where the Tata Group has no control whatsoever. Chandra must take the decision to exit underperforming businesses which is where he might run into trouble with the Board. The Tata Board is still burdened by the values implemented by the founders in a completely different business environment. In order for Chandra to succeed, he must walk the tightrope between the group’s values and rationality.
Yet filling the shoes of Ratan Tata shall be no mean feat. He must now entrust his successor at TCS, Rajesh Gopinathan, to continue delivering a major chunk of the revenue in a volatile business environment for the IT industry until the other group companies start punching at their weight. He must also bear the brunt of actions that would be brought on against the group by Cyrus Mistry after his unceremonious exit. The Shapoorji Pallonji Group owns around 18% stake in Tata Sons and the ouster of Cyrus will not sit well with them. This has the potential to prop up animosity and uncertainty in board meetings, something that Chandra will be expected to deal with from day one.
That is not to say that the group’s values are irrational but they surely could do with an update in these times. That is where the primary issue arose with Cyrus Mistry who seemed to be in conflict with the Tata group values and his decisions struck a negative chord with many of the board members. Chandra though, being a Tata group veteran is well-moulded in the organization itself. His leadership should contrast with that of Mistry since it is TCS that has virtually kept the group afloat which helps him command the respect of the Tata group in general.
By Poorv Sagar
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