Tata Group under Cyrus Mistry: Shedding Weight?
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Case Code: BSTR499 Case Length: 15 Pages Period: 2012-2016 Pub Date: 2016 Teaching Note: Available |
Price: Rs.500 Organization: Tata Group Industry: Diversified Countries: Chile, Latin America Themes: Diversified |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Tata Group Under Ratan Tata
Ratan Tata strongly believed that to achieve growth at the Tata Group, it was necessary to create technologically superior and exciting products. According to him, the Tata Group would have to distinguish itself from other companies through innovation and low costs. Ratan Tata focused on organic as well as inorganic growth strategies to grow the Tata Group. Some of the group’s businesses grew organically. For instance, TCS grew through investments in Greenfield projects. The software company grew by upgrading its technological capabilities, skill sets, and its infrastructure, and in the process, developed several new innovative software products. In 1981, in a bid to improve its R&D skills, TCS founded the Tata Research, Design and Development Center (TRDDC). The center played a key role in developing world class products...
Cyrus Mistry Steps In
In December 2012, Cyrus Mistry (Mistry) took over as Chairman of the Tata Group. While Ratan Tata was instrumental in turning the Tata Group into a US$ 100 billion empire, he was also responsible for the 11-fold increase in the group's debt burden. It was reported that Tata Steel's acquisition of Corus had led to Tata Steel incurring a huge debt of US$ 10.7 billion as of September 30, 2015, with a long-term debt of US$ 4.3 billion for its Europe business. Thus, Mistry faced the Herculean task of tackling the debt as well selling off the non-performing assets. In the first five months of taking over, Mistry instructed his CEOs to tighten spending. In May 2013, Tata Steel announced a write-down of US$ 1.6 billion, acknowledging that it had overpaid for the Corus acquisition. 13 He also planned to fix underperforming companies such as Tata Steel, the domestic arm of Tata Motors, and Tata Power...
The Results
In 2016, the Tata Group reported that under Mistry, the group's market capitalization had increased by 56 percent from Rs. 4922.67 billion in December 2012 to Rs. 7684.13 billion. The group's consolidated net sales increased by 25 percent from Rs. 2348.86 billion for the period April to September 2012 to Rs. 2948.19 billion for the same period of 2015. The group's net profit increased by 53 percent from Rs. 1193.89 billion for the period April to September 2012 to Rs. 1828.98 billion for the same period of 2015. 18 After Mistry took over, the market capitalization of TCS also doubled...
Looking Ahead
In June 2016, Tata Steel completed the selling of its 4.5 million tonne capacity European long steel business, including the giant Scunthorpe plant, to Greybull. As of June 4, 2016, the company was in talks with the UK government to retain the remaining 5.5 million tonne capacity steel business to save the jobs of 11,000 workers...
Exhibits
Exhibit I: Timeline of Tata Group
Exhibit II: Tata Group's International Acquisitions
Exhibit III: Consolidated Balance Sheet of Tata Steel (in Rs. Billion)
Exhibit IV: Consolidated Profit & Loss Statement of Tata Steel (in Rs. Billion)
Exhibit V: Tata Group’s Stock under Mistry
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