Stepping into Ratan Tata’s shoes was never going to be easy. More than just a successful industrialist, who transformed the businesses he inherited into a $100 billion conglomerate, the former Tata Sons chairman has always been regarded as a person of high integrity. So, for Cyrus Mistry, heading India’s biggest business house was always going to be a tough job all the more because he was beginning his stint in the midst of a global and domestic downturn.
A year down the line, Mistry must be an even more worried man. While it was always evident that the marquee clutch of companies he inherited weren’t all in great shape—some of them are doing brilliantly but a couple are losing money hand over fist—the past year would have taught him how tough it can be to turn around a business.
Mistry’s biggest misery would have to be that Tata Teleservices is a capital-guzzler that has failed to make money in more than a decade of its existence, despite thousands of crore having been spent on it. The Tata Sons chairman’s gameplan for the telecom piece is not clear but he must be praying someone—perhaps the firm’s partner Docomo—will buy out the Tata stake. Meanwhile, although the mild recovery in Europe has helped, Tata Steel’s debt is a debilitating R66,000 crore despite a couple of plants in Europe being mothballed and some sold; the overseas subsidiary barely generates the cash flows to cover sustenance capex. It’s unlikely the $13 billion buyout of Corus will ever pay off.
In the interim, Mistry has started taking impairments at some of the firms—Tata Steel, Tata Chemicals and Indian Hotels—and must unravel Ratan Tata’s strategy of accumulating top line through a string of overseas acquisitions—many of them ill-timed and expensive. Mistry’s mission from the very beginning, would have had to be one of containing the haemorrhaging rather than growing top line. Ratan Tata may have wanted a turnover of $500 billion in five years—the former chairman is understood to have outlined his vision to group executives at a meeting in March 2012—but right now Mistry would be looking to shed top line where possible so as to rein in the debt. His proposed investments of R45,000 crore in a couple of years, following the R50,000 crore invested in the three years to December 2012, will, in all probability, be used to add to existing capacity.
Indeed, there’s no