N Chandrasekaran's reappointment should be a big relief for Tata

N Chandrasekaran

Days ahead of Natarajan Chandrasekaran completing his term as chairman of Tata Sons, the group ended the needless suspense surrounding his, and its, future by confirming his reappointment for another five years. Logic, performance, and future challenges, all suggest that an extension should have been a formality. But then family business dynamics in India haven't always been based on reasoning, or even enlightened self-interest.

The issue becomes even more complicated in this case given the peculiar shareholding structure wherein the Tata Trusts control the holding company through their 66 percent stake, but play no part in its operations.

Still, Chandrasekaran’s extension shouldn’t have presented any great dilemmas. As a leader, his performance in the last five years, seen in growth numbers, profitability, and market cap of key companies, has been outstanding.

The 58-year-old Chandrasekaran who runs marathons when he has the time, has done it in his own unique style, which combines a deep understanding of the group's consolidated strengths, and a sharp awareness of the business environment.

With its holding company wracked by boardroom tensions which culminated in the dramatic ouster of former chairman Cyrus Mistry, the Tata group of January 2017 when Chandrasekaran was nominated to the top job, wasn't a happy place to be in. Mistry's ouster had brought to the fore the contradictions within the 150-year-old conglomerate, which had never previously entrusted a non-Tata, non-Parsi with the top job. Previously, when satraps like Darbari Seth and Ajit Kerkar had gotten too big, they were simply eased out in Ratan Tata's unification plan of the 1990s. Chandrasekaran, though a Tata lifer, had mostly been an outsider, left alone to steer TCS, the most atypical of the group's many enterprises.

It was also the most successful. TCS didn't just lead the IT industry in India, it bossed over it, setting new benchmarks in growth and profitability that were the envy of others such as Infosys and Wipro. No other Tata company enjoyed the kind of clout that the software giant did. Tata Steel in 2016 was still grappling with the legacy issue stemming from the overpriced acquisition of Corus in 2007.

Tata Motors, the other behemoth, had fallen into rough times with its very existence being questioned. The group's early and ambitious foray into telecom services had been spluttering for years and after the Jio expansion of 2016, faced certain death.

What's more, Tata had no presence in the emerging sectors of the economy, like e-commerce and green energy.

Chandrasekaran has gone about fixing these issues in his own measured way. With an engineer’s mind, and a super-salesman’s instincts, he made an assessment of the group’s strengths and weaknesses. Tata, he knew, was no ordinary conglomerate where you shut businesses overnight, and sent people home with a three months’ salary. He had been a Tata employee, unlike his predecessor, and long enough to know what working for the group meant to an Indian. It was the reason why people stuck on for years despite financial packages that were not market leading.

As chairman, therefore, he hasn't sought to rebuild the group based on some grand masterplan. Instead he took the much more difficult path of mining its several companies for their various strengths across businesses while exploring the synergies between them. As a result, when the idea for setting up a chip fabrication unit emerged, there was no need to go too far in search of competencies in the area. TCS had worked (and was working) with some of the world's best chip manufacturers, handling their core processes, and had enough knowledge in the bank. Similarly, Tata Motors’ push into electric vehicles comes on the back of key inputs from other firms like Tata Power, Tata Chemicals, and Tata AutoComp Systems.

There have been snafus too including missing out some key acquisition targets because other groups moved more swiftly. But as the acquisitions of 1mg, Big Basket, and in particular Tejas Networks proves, the Tata group has the speed and ruthlessness needed to compete in this environment.

For all the good work that Chandrasekaran has done, it is still a work-in-progress. The revival plan for Tata Motors, built entirely around electric vehicles, is fraught with risk. Three airlines under the same roof are simply untenable. The green energy space which the group is targeting aggressively, is building up to a fierce triangular fight between India’s three largest conglomerates: Reliance, Adani, and the Tata group. The winners and the winnings are several years away.

It isn't as if these issues will simply melt away merely because Chandrasekaran is around for another five years. It is just that having set a course it would make sense to follow it to its logical conclusion. Another premature change in plans isn't something that the group, under a visibly aging Ratan Tata, could afford.

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