Tata chief looks to build better channels with stakeholders

MUMBAI: Tata chairman N Chandrasekaran plans to spend more time on stakeholder management, by improving communications with principal shareholders, to power ahead with structural changes in the $111-billion conglomerate.


Chandrasekaran, who begins his third year as chief of India’s largest group, sees Tatas being focused on six large business opportunities — among them are IT services, steel, automobiles, consumer and financial services. The enterprise would place bigger bets on these. Another four — aviation, hospitality, infrastructure and trading — are regarded to be ‘good-to-have’ businesses but still in search of a coherent future plan.

In the past two years, the chairman has embarked on cleaning up cross-holdings, slashing the number of subsidiaries and exiting sub-scale, non-core businesses. The simplification drive is aimed at ensuring the group stays glued to core markets and businesses, making it bigger and, at the same time, forestalling the expending of energy and funds on less profitable ventures.

Chandrasekaran, or Chandra as he is called, also feels the need to be a more effective communicator, especially with stakeholders. The 55-year-old chairman, who instilled a sense of urgency and decisiveness to group activities, thinks this is essential to sustain the momentum, said insiders at Bombay House, the group’s storied headquarters.

Some senior advisers also share the view that the chairman needs to “socialise” in order to build support for his initiatives. They referred to practices in European companies where promoter families retain ownership with no managerial role, but top executives often interact with them in informal settings, thus creating a rapport to manage developments unfolding in the businesses.

“One of the things Chandra is improving is management of stakeholders, notably controlling shareholders — Tata Trusts,” said a source. “He regularly updates Ratan Tata (chairman of Tata Trusts) on every crucial business plan.” Recently, Tata Trusts reacted in an unenthusiastic manner to Chandra’s proposal to acquire Jet Airways, as part of a plan to scale up the aviation business.

It’s not difficult to fathom why Chandra is concerned about a possible slowdown in the group’s transformation. The Trusts, which bank on dividend income from the salt-to-software conglomerate to fuel its social sector projects, are getting desperate about the group’s over-dependence on Tata Consultancy Services (TCS). This is seen as partly a legacy of an earlier period when the group went on an acquisition spree to build a global portfolio of assets.

A look at the group’s listed companies’ profits for the nine months of fiscal 2019 is revealing. On a combined basis, the conglomerate reported a profit of Rs 6,952 crore (nearly $1 billion) in the first three quarters. And if TCS is excluded from the number, the enterprise is in a loss of Rs 16,394 crore. Profit was impacted due to impairment charges at Tata Motors’ UK arm

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Chandra is clear that group companies have to make money from their core operations and not from non-core, said sources familiar with his leadership style. They said Chandra is not interested if a business is generating a small profit or can’t be scaled up. The management resources can be better used in chasing the bigger opportunities.

Tata decided to divest the troubled European steel operations to focus on the more stable, meaty business in India, where it is ramping up capacity from 18 million tonnes to 25 million tonnes. It has axed the smaller, though profitable, Southeast Asian operations run through Nat Steel Singapore and Millennium Steel in Thailand.

The conglomerate has also exited the mobile telephony business in a sale to Bharti Airtel (still pending closure), oil & gas business operated through Tata Petrodyne, and BPO unit under Tata Business Support Services, among others. While the Tatas have a finger in almost every slice of business (in the past, many ventures were set up for varied reasons including backing the ‘nation-building’ mission), it may not be so in the future.

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