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Challenges galore as N Chandrasekaran takes helm as Tata Sons Chairman today

N Chandrasekaran will today walk into the corner room at Bombay House as the new Chairman of Tata Sons. His ascent to the helm of affairs at the $103 billion (over Rs 7 lakh crore) salt-to-software conglomerate makes him the first...

India TV Business Desk, Mumbai [Published on:21 Feb 2017, 12:08 PM IST]
File photo. N Chandrasekaran takes charge as Tata Sons
Photo: PTI File photo. N Chandrasekaran takes charge as Tata Sons Chairman on Feb 21

N Chandrasekaran will today walk into the corner room at Bombay House as the new Chairman of Tata Sons. His ascent to the helm of affairs at the $103 billion (over Rs 7 lakh crore) salt-to-software conglomerate makes him the first Chairman of the group with no family links to the Tatas.

Chandrasekaran, who has spent his entire career and climbed through the ranks at the Tata Consultancy Services Ltd (TCS), comes in at a time when the group is faced with significant headwinds – global and internal. Among the many challenges that the 54-year-old former TCS boss faces include litigation and the legacy issues that have been flagged by Cyrus Mistry, whom Chandrasekaran succeeds.

Since his unceremonious ouster, Mistry has flagged several issues in a set of letters to Tata Sons that the conglomerate will find tough to forget going forward. The holding company is in the midst of a fierce legal battle with its ousted chairman, something that will be just one of thye immediate challenges that Chandrasekaran will have to deal with.

Insiders believe that Chandrasekaran could ‘hit the ground running’. And there is ample reason for such expectations.

The new chairman is expected to take a hard look at what experts term as difficult companies under the group’s ambit. Tata Steel Ltd, Tata Power Co. Ltd, Tata Chemicals Ltd, Indian Hotels Co. Ltd and Tata Teleservices Ltd are all in trouble, earning sub-par returns or making losses.

Among the many issues that he inherits is the loss-making Tata Teleservices. Media reports on Monday suggested that Tata Teleservices wants to be a part of the ongoing Reliance Communications -Aircel merger. This is one company that the Chairman will have to take an immediate call.

Tata Teleservices is in losses and requires fresh fund infusion of Rs 10,000 crore by the financial year starting April 1. This is apart from the company facing the prospect of losing another $1.2 billion to NTT Docomo, which has sued Tata Sons in US, UK and Indian courts to force the latter to buy back its 26.5 per cent stake in Tata Teleservices. The entry of Reliance Jio and the proposed Idea-Vodafone merger will only make things tougher for the company.

Chandrasekaran, thus, needs to take a call on how much more of Tata Sons’ money should be poured into the company, Mint quoted an analyst as saying.

The losses Tata Steel is making at its British unit is another challenge that Chandrasekaran needs to deal with. The latter is in talks for a merger with Thyssenkrupp to cut the losses.  A recent ballot by British worker unions has paved the way for pension reform that could lead to a  merger with the German giant. Nevertheless, it is an issue that Chandrasekaran will need to negotiate soon.

The story at Tata Motors is no different. In Q3FY17, Tata Motors posted a 96 percent dip in profits on the back of weak JLR performance and unstable product mix. Despite the company taking several steps to revive its passenger car business in India, a border tax promised by US President Donald Trump could upset the finances at its Jaguar Land Rover arm, as the company does not have any plant in the US, say analysts.

Still, TCS and JLR are the two bright spots of the group in the past few years. Excluding these two, the group reported a net loss of Rs 160.7 crore. The challenge for Chandrasekaran, therefore, will be to decrease the dependence of the group on TCS and JLR.

Skeptics say that though Chandrasekaran has run TCS and given it a new face, he hasn’t run a conglomerate yet. His challenge is to ensure that Tata Sons grows strong enough to weather any storm. Moreover, he also needs to ensure that profit growth in the existing operations are not ignored and scaled up.

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