N Chandrasekaran gets second term at Tata Sons: Experts discuss the road ahead

N Chandrasekaran (File image: PTI)

Tata Sons, the investment holding arm of the Tata group of companies, announced the reappointment of Natarajan Chandrasekaran as its chairman for the second term on February 11. Chandrasekaran, often referred to as Chandra, was appointed chairman of Tata Sons in January 2017, a few months after Cyrus Mistry’s ouster from the post.

To discuss this development, Moneycontrol’s Nisha Poddar spoke to Amit Chandra, former member of Tata Sons board; Zia Mody, Founding and Senior Partner at AZB & Partners; Gopal Jain, senior lawyer of Supreme Court; VR Mehta, former trustee at Dorabji Tata Trust; and Vallabh Bhanshali, Chairman of ENAM Group.

Edited excerpts:

Amit Chandra, Chairman and Managing Director, Bain Capital

This is a very logical decision for which I must compliment the board of Tata Sons and importantly congratulate Chandra as well. Chandra has done a phenomenal job in his first term. But I think only the foundation work for a new Tata Group has begun and this extension actually provides the opportunity for continuity to complete a very important job for the sake of all stakeholders.

His first term has really been focused on three things -- establishing one Tata, building leadership mindset amongst the operating companies, and then ensuring that all of that gets translated into best-in-class performance across the group.

I remember people were very impatient for the first two years of his tenure when he was setting the plumbing but the results are evident. In the second half of his first innings, the Tata Group has vastly outperformed the index by nearly 80 percent. Importantly, this is not because one or two companies have done well, but two-thirds of the listed Tata Group has outperformed the index. The proof is in the pudding. And so his performance has been absolutely remarkable. Many of the key issues which existed when we appointed him have been set right. And he has really laid a great foundation for the future at a point of time when India is at a great inflection point for a wonderful 10 years ahead.

On what should be Chandra’s priorities going ahead

It is for the board and Chandra to work together and set the priorities but I've heard him make all the right noises. Digital, I think it's very important in India's future and therefore, for the Tata Group to really embrace digital. He's talked about clean energy and mobility. And he's talked about health; I think all these will be very important priorities for the Tata Group in the future. Given my personal bias, as I was a nominee of the trust, the ethos of the group, obviously, is deeply embedded in social change. So as the group has now set right the issues relating to cash flow, what I really hope for is that it will now be able to dividend a lot more to Tata Sons and Tata Sons will in turn be able to dividend a lot more to the Trusts. Together both the group and Tata trusts will be able to contribute a lot more towards nation building. And that's a hope and prayer that I hope for the next five or 10 years ahead.

Zia Modi, founder and senior partner, AZB & Partners

I don't think there was any question in our minds that he had to be extended. There was a great performance, your tracker is flashing that he upped the market cap by 188 percent. I think Chandra’s first five years have been just what brand Tata would have wanted – deleveraging, creating value, getting into the digital space, getting into electrical vehicles, and pulling off Air India. No mean feat. So, I think that this is no surprise or shock to the market, it was something that had to come and deservedly so. I think that he has managed to calm the group and managed to create leaders. He has the glory of having Tata Consultancy with $25 billion revenue last year. And I think that journey will continue wiser, more thoughtful, more purposeful, and I certainly look forward.

The future course of action

Sky's the limit. First of all, Chandra's personality is hugely aspirational. He actually reaches for the stars all the time. Always pushing to higher and higher heights. In the first term he deleveraged so significantly, but growth too happened side by side. If you look at the Super App that he's looking to develop, very excited about that from what I can see, and enough on his plate. So simply as he continues to consolidate and start some new initiatives, the five years will go by very quickly.

VR Mehta, Tata Trusts

Taking you back to when this decision was initially taken, or 24th of October, 2016. At first at our Tata trust when I was a trustee there, it was decided that we will let Cyrus Mistry go and have a new chairman and managing director. And then initially, Ratan Tata was the interim chairman and later on 16th of February, 2017, Chandra was appointed. At that time, I had been asked what my reaction was and I said it was an excellent choice. And Chandra was a known performer and his record at the TCS was absolutely wonderful. I had mentioned the main challenges facing the Tata Sons: that its main revenues, or the main profits are coming only from two star performers, one was TCS and the other was JLR. And I also mentioned that both of them were expected to face headwinds at that time, and if the other companies don't pull up their socks, then there'll be problems for Tata Sons and also consequently for the Tata Trust. And this is exactly what happened. JLR took a good beating because of the changes, economic situations, global economic situations and meltdown in the world economy. TCS did not really have to face any big headwinds, and they went on from strength to strength and are doing very well. But the most heartening part is that now, the other companies of the group, whether you take Tata Power or Tata Steel, are doing well. Tata Steel is now becoming one of the jewels of the company. After having performed so well in the last three-four years, today the Tata group is looking at different routes. And it has outperformed even the indices.

Vallabh Bhansali, founder, Enam Group

I would say that brave people deserve a lucky break so I don't think he got any disproportionate break. As a matter of fact, I would like to put in the context of perspective, what he has achieved. When he came the challenges were enormous. It was not only a Tata crisis; it was an India crisis. The biggest industrial house, the most respected industrial house had issues of conflicts. There were big corrections to be made in all the big companies -- Tata Steel, Tata Power, they had telecom issues and so on. And there was this equity crunch at the time. At that time, we were worried about leverages of several industrial houses and Tata Group was one of them. And the biggest of all, the culture of Tata is such a, it's a national heritage, and we had to do make all these corrections, keeping culture sensitivity. What Chandra has achieved is extraordinary. He's got a Padma Bhushan, but I would give him a Bharat Ratna because as I said, it was not a Tata crisis but an India crisis that he had to face.

One of the most important things from my point of view is that I do not find too many people in India at his level, who understand business, profit and loss account, and balance sheets -- all three. So not only does he bring the qualities of a marathoner -- patience, long-term thinking, long term vision, but he also has astute business qualities. That is what has enabled him to be a very different Tata person. He will ask the most compelling questions with his well-known smile. We saw corrections, waiting to happen for long periods of time. Now they happen very quickly. The kind of losses that he absorbed in his last five years is staggering. I don't think many people have done the math, but kind of cheques that he had to write out for, you know, all these corrections and then raise equity. He did not flinch, you know, acquiring Bhushan and other assets at the same time. So I think while the last five years for corrections and we have, you know, the most cultured and clever person to, you know, having done whatever he had to do, the future is even more exciting. I think I'm most excited now about the future, he had saved the situation in the past.

The Future

The future in India today is digital, of course, but it's an aspirational country. While Tata House was you know, getting into correction, fortunately India today stands corrected like never before. And it's a country full of aspiration. But as this aspirational country comes ahead, the opportunities and challenges will be very different. And I, as a small citizen of this country and a great admirer of Tata culture, think it would be fantastic if Tatas grab that opportunity because they will do right. They will do it for the long term. Deals in digital space and the new technologies which are all waiting to break through. What you're seeing on the surface is probably still five-year-old technologies which have come to the surface. But what is going to come out in terms of health, material sciences, communication, defence, etc. is yet to emerge. I am sure Tatas have some plans about it and Chandra will be the right leader.

Gopal Jain, Senior Supreme Court Lawyer

Having taken guard it seems to be a marathon innings that Chandra is out to play, so like with everybody else, I wish him a long innings. Second, as you said Air India -- happy homecoming, no dispute. This is very important because usually all disinvestments result in some form of dispute. So again, great credit to Tata culture that it happened with no controversy, no dispute. And initially as you know, it was a non-starter, didn't take off, but the moment Tatas came, it was again, successfully resolved. Third, if you remember, even the Supreme Court landmark judgment against Cyrus Mistry also came during his tenure. So a lot of legal victories under the belt. And in legal battles as well, I find the Tata culture of principle-based arguments and fights, not acrimonious contentious fight-for-the-sake-of-fight approach. So I think all of that will hold them in good stead as they go to new businesses because you certainly want to stay off courts in disputes, particularly in digital technology, getting into, you know, the E-commerce space, as well as E-pharma, etc. Under his leadership, we will also see fewer legal battles which is also a sign of coming of age in a very dispute-oriented culture that we had.