Cyrus Mistry takes over the reins of the $100 billion Tata group today. The task of spearheading a diversified conglomerate amid global economic slowdown and new challenges like corruption and slow government decision making will not be easy. It will be a trial by fire, whether in terms of adjusting the group's strategy in economically challenging times or fixing individual business lines. The biggest challenge may be living up to the legacy of Ratan Tata.
Here are five big challenges for Mr Mistry going ahead
- The big picture: The Tata group may need to adjust the mix of global and domestic operations to align with the new economic realities. Domestically, the Tata group is present in nearly every industry but new opportunities like banking may beckon if policies change. From a shareholder’s standpoint, increasing the return on equity across group companies will be a key challenge. And from an employee standpoint, integrating the group's 450,000 domestic & global employees will be crucial. (Also read: Who is Cyrus Mistry)
- Tata Steel: In November, Tata Steel Europe announced 900 job cuts, taking the number of job cuts at the company's European operation to over 3,000 in just three years. The job cuts became necessary after the European operations reported Rs 40 crore operating loss in the September quarter. The legacy of the $12 billion Corus acquisition has left Tata Steel with nearly $10 billion in debt, half of which will come up for refinancing in the next three years. At the same time, domestic slowdown has meant that volumes and profitability in the steel business are also under pressure.
- Tata Motors: The acquisition of iconic British luxury brands Jaguar Land Rover (JLR) has paid off for Tata Motors. JLR business is expected to see a 16 per cent growth in volumes this year. But that may not compensate for the weakness in the domestic auto business, where passenger vehicle sales in particular have been weak - down 8 per cent between April & November.
- Telecom business: Tata group's strategy in the telecom business also needs adjustment. Tata Teleservices remains a loss making business for the group and the joint venture with DoCoMo has failed to achieve leadership position in the GSM or the CDMA market. Mr Mistry will be well advised to focus on this business and consolidate the group's position in telecom.
- Hospitality business: The hotel business has been posting losses for the last four quarters and is now trying to move towards an asset light model to try and improve the company's financials. Mr Mistry may need to re-assess a proposed bid for Orient Express, which Indian Hotels has been pursuing for many years now.