Bloomberg News

Tata Said to Seek M&A Head as Mistry Grows Team

April 10, 2013

Tata Sons Ltd. Chairman Cyrus Mistry

Tata Sons Ltd. Chairman Cyrus Mistry and his new team will have to focus on boosting demand for the group’s products even as it seeks new growth opportunities. Photographer: Dhiraj Singh/Bloomberg

Tata Sons Ltd. Chairman Cyrus Mistry, chasing his predecessor’s vision of boosting revenue fivefold in the next decade, is searching for a head of mergers and acquisitions, a person familiar with the plan said.

Mistry, 44, is also looking for people to head finance, human resources and strategy, the person said, asking not be identified as the plan hasn’t been announced. The search may be completed in the next three months, the person said.

India’s biggest business group spent at least $15.5 billion buying companies in the past two decades, according to data compiled by Bloomberg. Deals are crucial for closely held Tata Sons, which controls the nation’s biggest automaker, Asia’s largest software developer by value and manages the Indian unit of Starbucks Corp., to achieve former Chairman Ratan Tata’s ambition of reaching $500 billion in annual sales by 2020, according Rajeev Vasudeva, partner at Egon Zehnder International Inc. in Mumbai.

“It’s hard to imagine that a group of Tata’s size can grow fivefold in 6-7 years without clinching some acquisitions,” said Vasudeva. Finding people who are culturally aligned to the Tata group “and who bring with them a global outlook as well as commercial savviness to restructure some businesses and grow others” will be a challenge, he said.

Biggest Acquisition

Acquiring companies and starting new businesses helped Ratan Tata boost revenue 23-fold since 1993. Tata Steel Ltd. (TATA) paid $12.8 billion for the 2006 purchase of Corus Group Ltd, India’s biggest overseas acquisition, while Tata Motors Ltd. (TTMT) purchased Jaguar and Land Rover.

Tata Communications Ltd. dropped out of a race to acquire Cable & Wireless Worldwide Plc after failing to agree on a price. Orient-Express Hotels Ltd., owner of New York’s 21 Club restaurant and Hotel Cipriani in Venice, in November rejected a takeover offer by Mumbai-based Tata’s Indian Hotels Co. (IH), saying the bid undervalues the company.

Arunkumar Gandhi, who helped former chairman Tata with purchases including Jaguar and Land Rover, retired this year. Director R. K. Krishna Kumar too retires from Tata Sons board in 2013. Finance chief Ishaat Hussain became a non-executive director when he turned 65 in September. Farrokh K. Kavarana, 68 and R. Gopalakrishnan, 66, will step down at 70, according to group policy.

Mistry may hire a new group head for human resources by the end of the month, the person said.

“We will communicate leadership changes as and when they happen, and would not like to comment on speculation regarding possible structures that may be put in place in the future,” Tata Sons said in an e-mail response.

‘Generational Shift’

Mistry, son of billionaire Pallonji Shapoorji Mistry, the single biggest shareholder of Tata Sons, hired Madhu Kannan as head of the group’s business development and Mukund Rajan as brand and chief ethics officer. Kannan was the managing director of Asia’s oldest exchange BSE Ltd. and former vice president at NYSE Group Inc.

“The succession would have been carefully thought through and managed such that there would be a generational shift,” said Saurabh Mukherjea, head of equities at Mumbai-based brokerage Ambit Holdings Pvt. “That makes life easier for the successor.”

A new team will help Mistry avoid a situation faced by his predecessor. Ratan spent his early years as chairman of the group asserting his authority and fending off many of the entrenched heads who had been vying for the the top position until Ratan was chosen by his uncle J.R.D. Tata, according to Gita Piramal, a Mumbai-based author of “Business Maharajahs.”

‘Bloody War’

JRD’s decentralized management style over the years had created satraps within the group who wielded control over their companies. Ratan Tata was “enmeshed in a bloody double-fronted war” with Russi Mody at Tata Steel and Darbari Seth at Tata Chemicals Ltd., Piramal wrote in her book.

“Ratan Tata drove a significant change in the governance of individual companies, making boards more accountable for performance and succession,” said Vasudeva at recruiting firm Egon Zehnder. “Earlier, individuals ran their own patch and were identified as the face of their businesses.”

Mistry and his new team will also have to focus on boosting demand for the group’s products even as it seeks new growth opportunities.

Tata Motors, maker of the world’s cheapest car, the Nano, reported a 70 percent drop in Indian passenger-vehicle sales for February to the lowest in a decade. Tata Steel, India’s biggest producer, posted the biggest loss in more than three years for the December quarter as Europe’s economic crisis sapped demand and slower Chinese growth weighed on commodity prices.

Tata Bank

The group’s 32 listed firms and Tata Sons have $35 billion of debt with a third of that due in the next three years, according to data compiled by Bloomberg.

“The challenge for Mistry will really be how to” expand further globally, said Piramal. “Is he going to grow it into a General Electric Co.?”

Mistry does plan to enter new businesses. Tata Capital Ltd. will apply for a banking license, Business Standard newspaper reported on April 4. India’s central bank sought applications from companies with “sound credentials and integrity” by July 1. Mistry will compete with billionaires Anil Ambani, Kumar Mangalam Birla and Malvinder and Shivinder Singh in vying for bank permits.

In February, Tata Sons said it will return to aviation in partnership with Malaysia’s budget airline AirAsia Bhd. and Arun Bhatia’s Telestra Tradeplace Pvt. The group will own a 30 percent stake and will have no operating role in the venture.

“Global experience within the management is now more crucial than ever,” said Jagannadham Thunuguntla, head of research at New Delhi-based SMC Global Securities Ltd. “The new hires will have to be in sync with that.”

To contact the reporter on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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