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Ousted chairman had Tata strategy; company says it was 'not suitable'

November 08, 2016 at 09:40 pm IST

NEW DELHI (Reuters) - Before he was ousted as chairman of Tata Sons, Cyrus Mistry presented the board with a roadmap to boost profitability, squeeze out more money for shareholders and more than double the Indian conglomerate's market value in 10 years, people familiar with the plans told Reuters.

In his Vision 2025 strategy document, which ran to more than 30 pages, Mistry planned to target 10 percent annual growth and boost the group's value to $350 billion - more than doubling Tata Sons' 66 percent stake to over $200 billion.

The strategy included restructuring loss-making businesses like Tata Steel's (>> Tata Steel Limited) European unit; being less dependent on crown jewel Tata Consultancy Services (TCS) (>> Tata Consultancy Services Limited); and piggy-backing on India's economic growth by investing in consumer-facing units, financial services and digital ventures.

The strategy was outlined to the Tata Sons board - and to family patriarch Ratan Tata - three times in 18 months, with the last presentation just months before Mistry's ouster, the people said. Tata has since taken over as interim chairman.

The strategy, one of the people said, was designed with the 150-year-old firm's investment principles in mind, with a focus on the long-term, entering pioneering industries, and holding a controlling stake in ventures.

It aimed also to raise the return on capital employed to 15 percent, and more than double the dividend payout ratio to up to 25 percent by 2025.

In a bruising, public row since Mistry was dismissed as chairman last month, some have criticized his lack of a long-term plan for the group. He remains chairman of some group companies including Tata Steel and Tata Motors (>> Tata Motors Limited).

A spokesman for Tata Sons said "a 5-year plan was presented in September, and was not found suitable."

Mistry's office did not respond to a request for comment.

'LEGACY HOTSPOTS'

Mistry was also criticized by some for his decision to sell what they felt were Tata family jewels, such as Tata Steel's loss-making Europe unit.

Despite an outside reputation as a ruthless businessman focused on profit, one of the sources said he spent more than two years trying to fix such legacy issues, including visiting the Welsh steelworks at Port Talbot to talk to union workers.

Mistry initiated merger talks with Germany's ThyssenKrupp (>> ThyssenKrupp AG) in an effort to salvage the steel business, even though it faced high UK energy costs, taxes and a costly pension scheme.

"If Tata Steel is able to merge with ThyssenKrupp it will be able to create a robust new company," the person said, noting talks with the German firm have slowed amid Tata's management upheaval.

Mistry also sought to deal with other "legacy hotspots" such as Indian Hotels Co (>> Indian Hotels Company Ltd), Tata Teleservices and the $1,500 Nano car.

"The strategy was focused on reducing the dependence on more cyclical businesses, and focusing more on more stable, consumer driven businesses," said another of the sources.

It made little sense to invest more in the Nano as the car would not have been able to meet stricter safety rules due to come into force in two years' time, the person noted.

One growth area that Mistry planned to develop further was financial services, such as an insurance venture, with a planned annual growth rate of 20 percent. Another focus area was Tata Global Beverages (>> Tata Global Beverages Ltd).

(Reporting by Aditi Shah and Euan Rocha; Editing by Ian Geoghegan)

By Aditi Shah and Euan Rocha

Stocks treated in this article : ThyssenKrupp AG, NTT Docomo Inc, Tata Motors Limited, Tata Steel Limited, Tata Global Beverages Ltd, Tata Communications Limited, Indian Hotels Company Ltd, Tata Power Company Limited, Tata Teleservices (Maharashtra) Limited, Tata Consultancy Services Limited

Ratan Naval Tata

Ratan Tata is at the head of Tata Group, a conglomerate of hundreds of subsidiaries among these Tata steel, the fourth largest steel company in the world, Tata Motors and Tata Telecom.

He graduated from Cornell University in New York; Ratan declined a proposal from IBM to join the Tata group. He began his career in steel branch of the group, where he stayed until 1971, where he was appointed Director of National Radio & Electronics Company (NELCO), company of the Tata group. In that period the company had met many difficulties, and then he bet on a new technology. In four years, the market share of Nelco rose to 20% from 2%, but this success will be very short.

In 1975 Indira Gandhi was Prime Minister, recession hit the country, the business suffered and social movements paralyzed Nelco’s production. The crisis will be strong as Nelco is forced to close.

In 1977 Ratan was in charge of the textile factory of the group, but the latter still using old technologies and suffered the competition of new factories. Ratan proposed to start a modernize process but the group didn’t give to him a financial support. In 1985, the factory closed.

In 1986 he was appointed chairman of Tata industries, before becoming in 1991 the CEO of Tata group. He began a restructuring process in order to draw seven areas of activity, in add he invited the old managers to leave the place in benefit to younger people.

In 2000 Tata bought Tetley Tea, English tea maker, this is the start of construction of the Tata empire.

In 2007, Tata acquired for $2.6 billion the anglo-dutch group Corus, specialist in steel and aluminium, and his group became the fourth largest steel producer in the world.

In March 2008, he bought two historic brands in the automobile sector, Land Rover and Jaguar for $2.3 billion, and he became the boss of 16000 UK employees. In late 2008, the automotive industry crisis brings down the manufactures’ profits nearly 30%, for this reason Tata decides to ask to Brown’s government to save Tata motors, and he requires a bill out of one billion dollars.

Tata group, it counts now 98 subsidiaries, 300 000 employees and 3.2% of Indian GFP.

In June 2011, the market capitalization of Tata group reached 4.32 trillion rupees, or $87 billion, and it is the first Indian group.

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Tata Teleservices Ltd. Tata Teleservices Ltd. Wireless TelecommunicationsCommunications Tata Teleservices Ltd. provides telecommunications services. It services include mobile services, wireless desktop phones, public booth telephony and wireline data services. The firm also provides Wi-Fi internet services, three-way conferencing and post-paid internet services. Tata Teleservices was founded by Ratan Naval Tata in 1996 and is headquartered in Mumbai, India.	Chairman
Investment Commission of India	Chairman

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