Indian hotels company: Cyrus reversed many of Tata's decisions

Ousted Tata Sons Chairman, Cyrus Mistry, arrives for Tata Steel's board meeting at Bombay House
By the time Ratan Tata handed over the reins of Tata Group’s oldest listed entity, Indian Hotels Company (IHCL) to Cyrus Mistry, it was already in a bad shape. Its debt had swollen to Rs 3,820 crore, its global position was nowhere near what was envisaged, marquee US properties were losing cash and piling losses, new brands Vivanta by Taj and Gateway were struggling even as no new Taj branded property was opened in over two years.

Tata’s close friend and confidante R K Krishnakumar, who headed IHCL as its vice-chairman, managed the affairs for six months after Mistry took over. But it was only after Krishnakumar’s retirement in July 2013 that changes brought in by Mistry became visible.

First came the withdrawal of long-standing, fruitless offer made by Tata to buyout Bermuda-based hotel chain Orient Express Hotels (now Belmond). Tata along with an Italian fund made a $1.86 billion bid to buy the loss-making company in 2012, only to be rebuffed again. 

Then came the abrupt exit of Raymond Bickson, the Hawaii-born managing director  (MD) and chief executive officer (CEO) of IHCL just a year (August 2014) after he was given a five year term to run IHCL when Krishnakumar was at the helm.

A month later Rakesh Sarna, the Indian-origin head of Hyatt Hotels (Americas), where he spent 35 years, was picked by Mistry to head IHCL as its new MD and CEO. Sarna was awarded a package that put him in the league of India’s highest paid CEOs and the second highest paid within the Tata Group even as IHCL was running into losses. Sarna was given a free hand by Mistry to turnaround the company and re-establish Taj brand, whose strength had dwindled due to fierce competition by foreign brands. In 2015, Sarna promised IHCL’s return to profitability in two years. For the six months ended September 30, 2016 IHCL reported loss of Rs 196 crore as against Rs 224 crore loss posted same period last year. It is unlikely that IHCL will return to black by the end of March 2017. 

While profitability eluded IHCL as new rival brands from Marriott, Hyatt, Starwood, and Intercontinental took away guests, the company was hit by a series of several senior level exits. Executive directors and senior vice presidents who spent decades at IHCL such as Anil Goel, Deepa Misra Haris, Abhijeet Mukherjee and Jyoti Narang quit the company.

In 2013, IHCL struggled to appoint independent directors thereby violating listing agreement clauses. New independent directors such as Guy Crawford quit the company one year after appointment. Amongst the new set of directors brought on board was NS Rajan, a member of the powerful Group Executive Council, which was dissolved by Tata recently. 

Some of the crucial decisions taken by Mistry were selling overseas acquisitions like marque properties Taj Boston (US), Blue Sydney (Australia) and shares in Belmond. 

 
IHCL’s total net consolidated debt stood at Rs 4,717 crore in FY16. As of September 30, 2016, gross consolidated debt stood reduced at Rs 3,625 crore while its stand-alone gross debt stood nearly unchanged at Rs 2,233 crore.

READ OUR FULL COVERAGE OF THE TATA-MISTRY BOARDROOM BATTLE