Column: Measured Mistry

Dec 06 2013, 03:33 IST
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SummaryCyrus Mistrys focus on the bottom line rather than on the top line is what the Tata group needs at the moment

Stepping into Ratan Tatas 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 Indias 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 werent all in great shapesome of them are doing brilliantly but a couple are losing money hand over fistthe past year would have taught him how tough it can be to turn around a business.

Mistrys 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 chairmans gameplan for the telecom piece is not clear but he must be praying someoneperhaps the firms partner Docomowill buy out the Tata stake. Meanwhile, although the mild recovery in Europe has helped, Tata Steels 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. Its unlikely the $13 billion buyout of Corus will ever pay off.

In the interim, Mistry has started taking impairments at some of the firmsTata Steel, Tata Chemicals and Indian Hotelsand must unravel Ratan Tatas strategy of accumulating top line through a string of overseas acquisitionsmany of them ill-timed and expensive. Mistrys 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 yearsthe former chairman is understood to have outlined his vision to group executives at a meeting in March 2012but 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, theres no

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