Mistry chants consolidation mantra for Tatas

Conglomerate’s below par performance worrisome.

By R. Chandrasekaran

CHENNAI: Tata Group chairman Cyprus Mistry is chanting the consolidation mantra before embarking on moves to make the group companies stronger.

The focus of Mistry, who took over the reins of Tata Sons nearly five months back, seems to be on the predicted lines given the explosive growth his predecessor Ratan Tata had delivered during his over two decade stint at the helm.

The new chairman’s focus also comes on the heels of some of the group companies’ below par performance and advantage being surrendered to rivals. For instance, Tata Motors has been struggling to hold on to strong sales and has witnessed a sharp fall in car sales during the recent past. Its dwindling market share is undoubtedly a major concern for the management.

Even when Ratan was at the top, Mahindra & Mahindra was allowed to overtake Tata Motors, whose market share of passenger vehicle dropped to 11.8 percent in 2012 from 14.2 percent in 2008. Even in the commercial sector, where it was considered to be strong, its share fell to 56.1 percent from 58.5 percent during the same period.

Similarly, Tata Steel faces a big debt burden due to the untimely acquisition of the Dutch-based Corus. While the Tata’s acquisition of Jaguar Land Rover was considered a good addition, they have overpaid for the Corus buy. The fact that the European and global economy continues to be in the sluggish mode also impacted Corus operations. There are also other below par performers such as Tata Power.

Therefore, it is quite obvious that Mistry would train his guns towards consolidation and arrest losses by regaining the stronghold the group once enjoyed. He is also reported by Reuters to have ordered his group companies’ CEOs to tighten the purse strings and replace oversight structures. The dictate seemed to have had its effect on the group companies that are valued around $100 billion.

The move to consolidate is more or less on predictable lines given the fact that there were many businesses, which were still in the early stages and needed to be consolidated.

For instance, its presence in the retail sector was a limited one due to the government’s policy. Similarly, in the telecom sector, Tata Teleservices entered the GSM fray along with Japanese Docomo later, though the company entered the CDMA space much earlier and it did not attract as much attention as the company would have liked it.

Tata Steel has now written down $1.6 billion. In the same way, its telecom company has surrendered part of its CDMA mobile airwaves to the government following the latter’s order to pay surcharges.

The much hyped small car Nano also needs the attention of the management as the sale number in April was low. Barring Tata Consultancy Services, most of the group companies needed a strong focus on consolidation. In the case of TCS, it needed to extended its geographical presence and it was doing exactly what it was expected to. The company took advantage of the Chinese premier’s recent ands held discussions with him at their office, the details of which are yet to be disclosed.

To contact the author, email to: rchandrasekaran@americanbazaaronline.com

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