On December 26, Cyrus Pallonji Mistry completes a year as chairman of Tata Sons, the holding company for the $100-billion conglomerate. Given that it’s been a difficult 12 months — GDP slowed to sub-5%, interest rates remain high and the rupee has weakened sharply — Cyrus Mistry must be a worried man.
The environment remains unfriendly and could delay the recovery in some of the group’s core businesses. Tata Power, for instance, is struggling at home as sales of commercial vehicles and cars stay weak. Indian Hotels isn’t faring too well either — room sales were down 2% year-on-year in the first half of the fiscal while a weak capex cycle continues to hurt Voltas — second-quarter revenues fell 7% y-o-y. The problem of high coal costs at Tata Power remains unresolved with the Mundra UMPP posting losses, and the fortunes of the group’s telecom piece haven’t reversed. Many group firms remain highly indebted — at Tata Steel, borrowings are now upwards of Rs 65,000 crore and interest costs at Indian Hotels have risen 20% y-o-y in Q2FY14.
Fortunately for Cyrus Mistry, recovery in Europe has helped Tata Steel’s subsidiary TSE and the Jaguar Land Rover business has done remarkably well — sales were up 25% y-o-y in November. Meanwhile, the rejig of Tata Chemicals’ European facilities continues. If Cyrus Mistry has reason to smile, it’s Tata Consultancy Services (TCS) — the IT major has successfully battled the global slowdown to stay ahead of the competition.
The group’s financial performance apart, Cyrus Mistry has tried to restructure the group. While the chairman inherited some of the country’s top professionals, he has formed a core group to assist him across key functions; Bombay House now sports a young look.
More important, Cyrus Mistry has also put in place some prudent accounting practices to ensure that assets are valued realistically — Tata Steel, for instance, has taken a $1.6-billion (Rs 8,356 crore) non-cash write-down of goodwill and assets. On these counts he must be satisfied.