RPT-Tata's Mistry man: tightening belts as more frugal era begins

Sun May 26, 2013 10:34pm EDT

(Repeats story with no changes to text)
    * CEOs at Tata companies instructed to cut costs - sources
    * New steering committee to give greater oversight of
sprawling group
    * Mistry, 44, took charge of $100 bln conglomerate on Dec.
28
    * Tata says committed to growth, investing $10 bln over 2
years

    By Henry Foy
    MUMBAI, May 27 (Reuters) - As Ratan Tata strode the halls of
the Geneva Motor Show in March, joking with journalists and
chatting with auto industry leaders, his successor at the helm
of India's biggest business group stood silently on the
sidelines.
    Shunning the spotlight since taking charge of the $100
billion Tata group in December, 44-year-old Cyrus Mistry has
focused on belt-tightening at a conglomerate left bloated by
explosive growth under his predecessor.
    "Ratan was much more ... strategic, more over-arching.
 's much more focused. The CFOs as well as the business
heads are going to find it a much more rigorous exercise," a
director who sits on multiple Tata company boards told Reuters.
    In early February, at his first Tata Chemicals 
board meeting as group chairman, Mistry sat quietly as directors
debated efforts to find synergies between interests dotted
around the globe, from Wyoming to Gabon. Bringing the discussion
to a halt, Mistry politely but firmly outlined that further
consolidation was the only way forward. 
    "He summed up the decision: 'This is what we are doing'," a
person present at the meeting told Reuters. "It's quite clear he
believes in the process of consolidation."
    
    FAST GROWTH
    The last decade of Ratan Tata's tenure saw revenue grow
ten-fold to $100 billion in the year ended March 2012, fuelled
by acquisitions including an ill-timed $13 billion deal for
Anglo-Dutch steelmaker Corus and a more successful $2.3 billion
purchase of luxury car brands Jaguar and Land Rover (JLR).
    The group spent billions more on overseas assets like
engineering firms, luxury hotels and coffee brands. Tata
Chemicals alone bought, invested in or merged with eight
companies between 2004 and 2011.
    Mistry's job is to consolidate, three directors said, an
effort focused on getting more from existing businesses, as
opposed to shedding assets.
    "A very good numbers man, very hard-nosed in the way he
approaches things, which is what is probably sorely required
now," the first director said.
    In his first five months on the job, Mistry has ordered his
CEOs to tighten spending, and replaced oversight structures to
give him greater influence over the running of the more than 100
group companies. 
    The impact is starting to be felt. This month Tata Steel
 announced a $1.6 billion write-down, an
acknowledgement that it overpaid for Corus. Last month, its
mobile phone unit, which ranks sixth in India by users, said it
will surrender part of its CDMA mobile airwaves in most of its
zones after the government asked carriers to pay surcharges.
    "Each company will be doing it for himself ... that's the
overall guidance and the strategic direction," another director
told Reuters. 
    Besides Tata Chemicals, Mistry's to-fix list includes
underperformers such as the domestic arm of Tata Motors
, Tata Steel, and Tata Power, people familiar
with the plans told Reuters. 
    All directors and executives who spoke to Reuters for this
article declined to be identified due to the sensitivity of
their comments. Mistry declined to be interviewed.
    In response to written questions, the Tata group noted it
has invested more than $10 billion over the past three years and
has already committed a similar amount towards expansion over
the next two years, in India and globally.
    "Growth through both organic and inorganic means as well as
consolidation, where appropriate, have been consistent themes
for the past two decades, and we see no change in these twin
themes looking ahead," a spokesman said.
    Among newer initiatives, Tata is in the process of forming
an Indian airline with Malaysia's AirAsia Bhd, and is
widely expected to apply for a licence to set up a bank in
India.
    
    
    
    MYSTERY MAN
    Described by friends and colleagues as quiet and unassuming,
Mistry was a surprise choice to replace Ratan Tata, who retired
on Dec. 28 after 21 years in charge. Mistry's appointment, in
November 2011, sent the media into a frenzy to profile a man few
had heard of.
    Ubiquitous in India, the Tata group makes the buses that
transport millions of commuters to work each morning, the steel
that built their offices and the salt that flavours their lunch.
    Mistry rarely speaks in public. He gave brief remarks at the
January "Vibrant Gujarat" event organised by Narendra Modi,
chief minister of the state where Tata's low-cost Nano car is
made and a potential candidate for prime minister, but his other
appearances have mainly been at company functions. 
    Those who have heard him say he has yet to develop the
gravitas and charm of his predecessor. At a banquet in January
to mark his ascension, his tribute to Ratan Tata resembled a
curt, formal vote of thanks, a person present told Reuters.
    "It was almost like he was addressing people at a function,
thanking the organisers for putting on a good show, that kind of
thing," said the person.
    Mistry, who has chosen not to move into the former
chairman's empty office, is yet to sit for a media interview or
address a press conference, but is known to attend company
events unannounced and without fanfare. At a Jaguar Land Rover
party last year, he mingled with guests in an open-collared
shirt. 
    Tata companies are in the midst of reporting the first full
quarterly results of Mistry's tenure, and many shareholders will
get their first glimpse of him as chairman during the summer
annual meetings season.
         
    FAMILY TIES
    Educated in Mumbai and London, Mistry joined the board of
his family's engineering company, Shapoorji Pallonji & Co Ltd,
aged 23 and became its managing director three years later.
    His path was paved by his father, Pallonji Mistry, a
billionaire Irish construction magnate whose 18.4 percent stake
in Tata Sons, the group's holding company, makes him
the largest individual shareholder in a conglomerate mostly
controlled by charitable trusts.
    The senior Mistry, dubbed "The Phantom of Bombay House" for
his influence at Tata's storied colonial headquarters in south
Mumbai, gave up his seat on the holding company board in 2006 to
make room for Cyrus.
    Like the Tatas, the Mistrys are part of Mumbai's tight-knit
Parsi community, and Cyrus Mistry's sister is married to Noel
Tata, Ratan's half-brother who had been seen as a potential
successor. Mistry is married to a lawyer's daughter.
    
    BRAIN TRUST
    To strengthen his hand in the battle on Tata's bulge, Mistry
abolished two committees created by Ratan Tata and replaced them
with a "group executive council", a brain trust of lieutenants
close in age to Mistry.
    Members of the council, which includes former Bombay Stock
Exchange head Madhu Kannan and Ernst & Young veteran N.S. Rajan,
will soon be given seats on Tata company boards. A member with
responsibility for the finances of the overall group will soon
be appointed, a Tata Sons official told Reuters.    
    "It's not revolution, it's evolution," said Andrew Holland,
CEO of Ambit Investment Advisors in Mumbai, who manages funds
with investments in various Tata group companies. "If they can
consolidate, get some costs down, get the debt down, then it
would be a much more attractive investment."
    Mistry became only the sixth chairman of the 145-year-old
conglomerate after spending little more than a year shadowing
Ratan Tata around a diverse group that includes India's biggest
IT exporter, biggest automaker by revenue, and largest
private-sector steel and electricity producers. Some 60 percent
of revenue is made overseas.
    The group's spending spree, almost all before the global
financial crisis, made Tata's blue 'T' logo a global brand, but
has also distracted from problems including skidding sales in
its domestic car business and falling cellphone market share.
    Excluding Tata Consultancy Services (TCS), a cash
cow, the top 10 publicly-listed Tata companies saw combined net
profit fall an annual 18.3 percent in April-December, despite
revenue rising 14.6 percent, according to Reuters calculations.
    "The world has changed quite dramatically since the big
acquisitions," said a banker who worked on the JLR deal. "They
do need to trim down."

 (Additional reporting by Aradhana Aravindan, Sumeet Chatterjee,
Aditi Shah and Indulal PM; Editing by Tony Munroe and Ian
Geoghegan)
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