Having been groomed for over a year for the high profile assignment, Mistry will now be exposed to the world as the head of the Tata Group and should brace up for critical evaluation over the next few years, especially because he will be compared to his predecessor. While he has been appointed for the long-term and age is on his side, the role does not come to him without challenges.
Having moved from a close family owned and run Shapoorji Pallonji Group to a group like the Tata's, which has multiple premier listed companies and that is run by successful CEOs, Cyrus will have to be both accommodative while maintaining the free hand that was provided by outgoing chief Ratan Tata.
Another big challenge before Cyrus will be to maintain the reputation and sanctity of the group, at a time when the fight for natural resources is only getting intense.
If Ratan Tata was helped by the economic liberalisation in the Indian economy that started in the year he took over as the group head and also took the Group to the world in a big manner through mega acquisitions such as — JLR, Corus and Tetley — Mistry has to lead the company through domestic and global slowdown. The stakes are extremely high now, with a large portion (58 per cent) of the group's revenue now coming from international businesses.
A look at the challenges that Mistry has on hand across the flagship companies of the Group:
The challenge begins with Tata Steel's debt amounting to Rs 53,431 crore as on September 2012, which has stayed at those levels since it acquired Corus. Analysts tracking the company say that European operations continue to be a major problem for the company and with slowdown in the demand in Europe and a falling export demand because of downturn in Asia (especially China), the company's troubles are only growing. On the domestic front too, slowdown in infrastructure, construction and automobile industry are hurting.
Its dominance in the commercial vehicle space may have gone unchallenged for years now (around 60 per cent of the market) but there is a serious challenger that has entered the market this year in Daimler, which has invested Rs 4,500 crore in its plant in Chennai and launched its Bharat Benz trucks this year. Even Ratan
Tata has acknowledged the competition and mentioned in the annual report that the company is developing competitive and fuel-efficient vehicles. There is also competition from Volvo and Mahindra. While JLR has done well over the last year even in a challenging global environment and has contributed significantly to the company's revenues and profits, experts feel that the company needs to evolve further.
While the entire industry is affected, this is something that Mistry will have to deal carefully and strategically in a way to secure fuel supply for the company's power projects and thus their future. While coal block allocation has been a cause of concern, imported coal prices which are significantly higher than the domestic coal is making a lot of projects unviable. In 2011-12, the company provided Rs 1,800 crore for impairment in its Mundra Mega Power plant, which led to an overall loss of Rs 968 crore in the year for the company. While it has approached CERC to address the issue of imported coal prices, Mistry will have to deal with the challenge of securing fuel at viable costs for the company's power projects.
This is the biggest cash generator for the group and the second largest Indian company in terms of market capitalisation. In the year 2011-12 the company generated a net profit of Rs 10,975 crore on a revenue of Rs 38,858 crore. Experts say that TCS is now in a big league of global players and Mistry will have to move away from the linear growth model and see where the growth can come from. While it is in the league of IBM and Accenture, the company lags presence in the consulting business and expenditure on R&D which can be critical for future growth.
The company has grown rapidly and is a strong brand. With revenues of Rs 8,800 crore in 2011-12, Titan has a market capitalisation of close to Rs 25,000 crore.
The challenge for the Tata Group will be to capitalise on the strong brand to widen its product portfolio. Another challenge would be to make Titan a strong brand in the global market.