Turn next to Indian Hotels, which like Tata Steel has been a donkey carrying enormous debt because of overseas and domestic acquisitions. That debt is still there on the books, but sundry overseas properties have been hawked, and the company has stopped hemorrhaging financially. The appointment of a purposeful chief executive, hired two years ago from Hyatt, seems to have made a difference to operations, something that the stock market has recognised.
Meanwhile, fortuitously or otherwise, the once crisis-ridden Tata Power has moved from large losses in 2011-12 to initially modest and now growing profits. Also, earlier this year, Tata Chemicals got rid of its low-margin fertiliser business, with the intention of focusing henceforth on higher-margin operations in inorganic chemicals. That accounts for five of the large companies in the group. Two others, Tata Consultancy Services and Titan, have been the group’s stars; both have lost some momentum, but can be trusted to deliver without group intervention.
That leaves one running sore: Tata Teleservices and the dispute with NTT Docomo about a $1.17 billion buyback that had been agreed to, but which Mr Mistry has contended runs foul of Indian law. He is right on the legal technicality, but it is unlikely that he would have taken that position if the buyback did not mean adding hugely to what is already a wholesale loss. As commentators have rightly pointed out in the course of the tumultuous week gone by, Mr Mistry has caused a group with a rock solid reputation for honouring its commitments to soil its copybook. Reputations and the building of trust matter in business, more so for an enterprise like Tata.
Going down this list makes one thing clear: Mr Mistry has been cleaning up the mess inherited from his predecessor. Inevitably, the subtext to the events of the last few days has been about Ratan Tata’s legacy, and whether it was being sullied. This should be a non-issue, for Mr Tata should know that his legacy is secure, given where he took the group from what he had at the start. He capitalised splendidly on the big opportunity that was IT services, he shored up the group’s shareholding structure, welded group companies together with initiatives in human resources and group branding, and made some bold, visionary moves. The acquisition that worked brilliantly was Jaguar Land Rover, bought for 1.15 billion pounds; the business delivered nearly four times that sum in pre-tax profits over just the last couple of years. To be sure, there were the bets that went wrong. He bungled on telecom, which was the big opportunity of his second decade as group boss; he paid top dollar at the top of a cyclical market for a steel business, using borrowed cash; and his love of marquee hotels and airlines should not have influenced investment decisions. He should have wanted a successor who would be his own man and clean up the messy stuff, so that what is left shines. Instead, we have a sacking whose fallout will do more damage to the house of Tata than anything else.