Challenges ahead for Ratan Tata's successor Cyrus Mistry

As Ratan Tata tweeted on Thursday that he is looking forward to his retirement in December next year, his young successor Cyrus Mistry will be confronted with the challenge of revving up some of the flagship companies of the Rs 4.2 lakh crore salt-tosteel conglomerate.

Tata Motors has been rapidly losing market share to Mahindra & Mahindra in the passenger vehicle segment as the younger Anand Mahindra has brought in new SUV models and technologies to outgun Tata vehicles such as the Sumo and Safari. The sales of the Nano have been far from impressive and the company has been offering discounts to push numbers. The Indigo family, on which it was banking to boost car sales, appears to have lost out to rivals such as Volkswagen and Ford.

PERSPECTIVE: Tatas bowl a googly

WHY MISTRY? Shapoorji Pallonji and Co. has grown over 10-fold since the turn of the millennium (Cyrus took over as managing director much before, in 1994), with a turnover now of Rs 2,678 crore and a profit of Rs 111 crore Eureka Forbes grew a little over three times in size but profits grew more modestly, at a little over a half from Rs 12.6 crore in 1999-2000 to Rs 19.17 crore (Rs 191.7 million) in 2009-10 When he took over Afcons Infrastructure as its chairman in the year 2000, it was a Rs 280-crore company, with Rs 5-crore profit. In 2010, the company's revenues were Rs 1,042 crore and net profit was Rs 59 crore Cyrus is on the board of 14 unlisted companies and two listed ones Cyrus played a dominant role in deciding against listing on the exchanges. It seemed to have clicked, given the state of several listed infrastructure and real estate peers, whose value eroded in the market HE LOVES HORSES & BOOKS Cyrus is the youngest of Pallonji's two sons. He has two sisters and is married to Rohika Chagla, daughter of a prominent lawyer He is known for sharing his family's love of horses Mistry describes himself as a voracious reader of business books and a golfer A civil engineering graduate of Imperial College, London, he did MSc in Management from the London Business School, and was until Wednesday the MD of the SP group

Tata's marketing joint venture with Italian carmaker Fiat, once flaunted as a win-win situation for both companies, has also come a cropper. While Rata Tata has successfully turned around the iconic British brands Jaguar and Landrover, the uncertainties gripping the western economies, have led to slow sales again. Tata Motors profit for the second quarter (July-September) for the current fiscal fell 16 per cent to Rs 1,877 down Rs 2,233 crore in the same period in 2010. Lagging market estimates hit by higher costs and foreign exchange losses, have been cited as the main reasons for the dismal quarterly results.

Among the 90 companies Tata Sons controls , the biggest loss maker for the group continues to be its mobile telephony arm - Tata Teleservices (TTSL). It reported a loss of Rs 1,330 crore for the year ended 2010-11. However, the losses have been pruned considerably from the Rs 4,559-crore loss it reported in 2009-10.

According to the latest data released by the Telecom Regulatory Authority of India (Trai) on Thursday, of the Rs 50,054 crore as total revenue from Indian telecom operators during the quarter ended September, TTSL and Tata Communications, held a 8.3 per cent share with gross revenue of Rs 4,163.14 crore.

The pan-India operator that has businesses spread across 22 of the 23 telecom circles in the country, posted a loss of Rs 130.21 crore for the quarter ended September 30, 2011. However, to be fair to the Tatas, even other Indian telcos have been struggling to manage the enormous volumes of debt payments, as earnings have fallen due to low tariffs, precipitated by the fierce competition in the telecom sector. They have been forced to look internally to generate cost savings from their operations.

PROFILE: Who is Cyrus P Mistry?

According to an industry source, "It is not that the Tata group is going through a crisis, however, the high debt burden with companies such as Tata Steel and Tata Motors will have to be trimmed going ahead for the company to cut costs and increase profit margins."

TATA Power is also facing problems as the company has not been able to commission its 4,000 MW Mundra ultra mega power project this year. Tata Power, like other power producers, has suffered due to high coal prices and depreciation of the rupee. After funding 63 per cent of the costs, the lenders are holding back the remaining loans as they are worried over the cash flows.

The company's consolidated net loss in the second quarter of the current fiscal was Rs 1,219 crore, down from a profit of Rs 673 crore in the same quarter last year. Tata Consultancy Services Ltd. (TCS), the Tata group's biggest unit by market value, is India's largest information technology company worth $2.2 billion (Rs 10,870 crore).

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However, the company's growth has slowed due to the sovereign debt crisis in Europe and fragile recovery of the US economy, which together account for twothirds of its market. "A lot of initiative has to be taken by the company to diversify into other markets as well," an industry insider said.

While TCS remains India's largest IT company, competition is emerging from countries such as Brazil, China, Philippines and Vietnam. It now remains to be seen whether the 43-year-old Mistry will throw up new ideas to take the group forward. According to a company insider: "Cyrus has been on the board of Tata Sons since 2005 and has been credited with bringing well calibrated and intelligent suggestions to the table."

Courtesy: Mail Today