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Tata's Mistry man: tightening belts as more frugal era begins

Tata Group chairman Cyrus Mistry attends the "Vibrant Gujarat Summit" at Gandhinagar in the western Indian state of Gujarat January 12, 2013
Tata Group chairman Cyrus Mistry attends the "Vibrant Gujarat Summit" at Gandhinagar in the western Indian state of Gujarat January 12, 2013

By Henry Foy

MUMBAI (Reuters) - As Ratan Tata strode the halls of the Geneva Motor Show in March, joking with journalists and chatting with auto industry leaders, his successor at the helm of India's biggest business group stood silently on the sidelines.

Shunning the spotlight since taking charge of the $100 billion Tata group in December, 44-year-old Cyrus Mistry has focused on belt-tightening at a conglomerate left bloated by explosive growth under his predecessor.

"Ratan was much more ... strategic, more over-arching. 's much more focused. The CFOs as well as the business heads are going to find it a much more rigorous exercise," a director who sits on multiple Tata company boards told Reuters.

In early February, at his first Tata Chemicals board meeting as group chairman, Mistry sat quietly as directors debated efforts to find synergies between interests dotted around the globe, from Wyoming to Gabon. Bringing the discussion to a halt, Mistry politely but firmly outlined that further consolidation was the only way forward.

"He summed up the decision: 'This is what we are doing'," a person present at the meeting told Reuters. "It's quite clear he believes in the process of consolidation."

FAST GROWTH

The last decade of Ratan Tata's tenure saw revenue grow ten-fold to $100 billion in the year ended March 2012, fuelled by acquisitions including an ill-timed $13 billion deal for Anglo-Dutch steelmaker Corus and a more successful $2.3 billion purchase of luxury car brands Jaguar and Land Rover (JLR).

The group spent billions more on overseas assets like engineering firms, luxury hotels and coffee brands. Tata Chemicals alone bought, invested in or merged with eight companies between 2004 and 2011.

Mistry's job is to consolidate, three directors said, an effort focused on getting more from existing businesses, as opposed to shedding assets.

"A very good numbers man, very hard-nosed in the way he approaches things, which is what is probably sorely required now," the first director said.

In his first five months on the job, Mistry has ordered his CEOs to tighten spending, and replaced oversight structures to give him greater influence over the running of the more than 100 group companies.

The impact is starting to be felt. This month Tata Steel announced a $1.6 billion write-down, an acknowledgement that it overpaid for Corus. Last month, its mobile phone unit, which ranks sixth in India by users, said it will surrender part of its CDMA mobile airwaves in most of its zones after the government asked carriers to pay surcharges.

"Each company will be doing it for himself ... that's the overall guidance and the strategic direction," another director told Reuters.

Besides Tata Chemicals, Mistry's to-fix list includes underperformers such as the domestic arm of Tata Motors , Tata Steel, and Tata Power , people familiar with the plans told Reuters.

All directors and executives who spoke to Reuters for this article declined to be identified due to the sensitivity of their comments. Mistry declined to be interviewed.

In response to written questions, the Tata group noted it has invested more than $10 billion over the past three years and has already committed a similar amount towards expansion over the next two years, in India and globally.

"Growth through both organic and inorganic means as well as consolidation, where appropriate, have been consistent themes for the past two decades, and we see no change in these twin themes looking ahead," a spokesman said.

Among newer initiatives, Tata is in the process of forming an Indian airline with Malaysia's AirAsia Bhd , and is widely expected to apply for a license to set up a bank in India.

MYSTERY MAN

Described by friends and colleagues as quiet and unassuming, Mistry was a surprise choice to replace Ratan Tata, who retired on December 28 after 21 years in charge. Mistry's appointment, in November 2011, sent the media into a frenzy to profile a man few had heard of.

Ubiquitous in India, the Tata group makes the buses that transport millions of commuters to work each morning, the steel that built their offices and the salt that flavors their lunch.

Mistry rarely speaks in public. He gave brief remarks at the January "Vibrant Gujarat" event organized by Narendra Modi, chief minister of the state where Tata's low-cost Nano car is made and a potential candidate for prime minister, but his other appearances have mainly been at company functions.

Those who have heard him say he has yet to develop the gravitas and charm of his predecessor. At a banquet in January to mark his ascension, his tribute to Ratan Tata resembled a curt, formal vote of thanks, a person present told Reuters.

"It was almost like he was addressing people at a function, thanking the organizers for putting on a good show, that kind of thing," said the person.

Mistry, who has chosen not to move into the former chairman's empty office, is yet to sit for a media interview or address a press conference, but is known to attend company events unannounced and without fanfare. At a Jaguar Land Rover party last year, he mingled with guests in an open-collared shirt.

Tata companies are in the midst of reporting the first full quarterly results of Mistry's tenure, and many shareholders will get their first glimpse of him as chairman during the summer annual meetings season.

FAMILY TIES

Educated in Mumbai and London, Mistry joined the board of his family's engineering company, Shapoorji Pallonji & Co Ltd, aged 23 and became its managing director three years later.

His path was paved by his father, Pallonji Mistry, a billionaire Irish construction magnate whose 18.4 percent stake in Tata Sons , the group's holding company, makes him the largest individual shareholder in a conglomerate mostly controlled by charitable trusts.

The senior Mistry, dubbed "The Phantom of Bombay House" for his influence at Tata's storied colonial headquarters in south Mumbai, gave up his seat on the holding company board in 2006 to make room for Cyrus.

Like the Tatas, the Mistrys are part of Mumbai's tight-knit Parsi community, and Cyrus Mistry's sister is married to Noel Tata, Ratan's half-brother who had been seen as a potential successor. Mistry is married to a lawyer's daughter.

BRAIN TRUST

To strengthen his hand in the battle on Tata's bulge, Mistry abolished two committees created by Ratan Tata and replaced them with a "group executive council", a brain trust of lieutenants close in age to Mistry.

Members of the council, which includes former Bombay Stock Exchange head Madhu Kannan and Ernst & Young veteran N.S. Rajan, will soon be given seats on Tata company boards. A member with responsibility for the finances of the overall group will soon be appointed, a Tata Sons official told Reuters.

"It's not revolution, it's evolution," said Andrew Holland, CEO of Ambit Investment Advisors in Mumbai, who manages funds with investments in various Tata group companies. "If they can consolidate, get some costs down, get the debt down, then it would be a much more attractive investment."

Mistry became only the sixth chairman of the 145-year-old conglomerate after spending little more than a year shadowing Ratan Tata around a diverse group that includes India's biggest IT exporter, biggest automaker by revenue, and largest private-sector steel and electricity producers. Some 60 percent of revenue is made overseas.

The group's spending spree, almost all before the global financial crisis, made Tata's blue 'T' logo a global brand, but has also distracted from problems including skidding sales in its domestic car business and falling cellphone market share.

Excluding Tata Consultancy Services (TCS) , a cash cow, the top 10 publicly-listed Tata companies saw combined net profit fall an annual 18.3 percent in April-December, despite revenue rising 14.6 percent, according to Reuters calculations.

"The world has changed quite dramatically since the big acquisitions," said a banker who worked on the JLR deal. "They do need to trim down."

(Additional reporting by Aradhana Aravindan, Sumeet Chatterjee, Aditi Shah and Indulal PM; Editing by Tony Munroe and Ian Geoghegan)

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