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Can Cyrus Mistry repeat the magic with Tata Steel?

Wednesday, 26 December 2012 - 2:46am IST | Place: Mumbai | Agency: dna

Ratan Tata, the outgoing chairman of Tata Group, and Cyrus Mistry, who takes his place this Friday, have at least one thing in common – the problems of Tata Steel.

Ratan Tata, the outgoing chairman of Tata Group, and Cyrus Mistry, who takes his place this Friday, have at least one thing in common – the problems of Tata Steel.

When Tata took over 21 years ago, then 54, steel prices had just been deregulated. And months later, on July 25, 1991, the economy was liberalised, opening a completely unprepared Tata Steel to ruthless international competition.

Cut to December 28, when the 43-year-old Mistry takes over.
Tata Steel has Rs60,000 crore of debt, some 81,000 employees and revenues of Rs1,45,000 crore with a very poor consolidated growth rate. Worse, Mistry has over 100 companies to look at instead of a clutch of companies way back in 1991.

Baptism by fire, one could say, to use a cliche. The good part is that it had worked for Tata; set the stage for him to show his mettle. By extension, it could work for his successor, too.

“Neither Mr Russi Mody, the previous MD, nor I, if we were put in that situation, would have been able to save the company… when the ship is sinking, you have to put a man who is at the steering. It was at that time that I saw Mr Ratan Tata at work,” B Muthuraman, former managing director of Tata Steel, who was then a senior executive at the Jamshedpur site, is quoted as saying in R M Lala’s book

What followed was a stream of fresh ideas, newer technologies, better marketing strategies and big ambitions, which eventually converted a sinking 2 million tonne per annum (mtpa) steel plant into an 18 mtpa global steel player, ranked sixth in the world.

“…he sounded different from any one of us. He made us question the unquestionable; he made us think big and gave us confidence. He empowered us. He brought team spirit in us,” said Muthuraman in the book.
But one bad acquisition and a highly dampened western market have left the company reeling again, just ahead of the change of guard.

“Tata Steel is in a very bad shape. The company is bearing heavy with a massive debt and the management in Europe (Tata Steel Europe’s team) is predicting very tough times ahead,” said the vice-president of a leading equity research firm. Turn to Page 12

The moot question, therefore, is – can Mistry do it?

His colleagues reply in the affirmative.

“He is no stranger to wealth creation and managing difficult times and cross cultures,” said a top official in the company.
During his 16 years as the top boss of Shapoorji Pallonji and Co, the infrastructure group’s revenues have grown 18 times and the company has spread its wings to various countries.

“He has a penchant for management ideas and always makes it a point to buy and gift books on new management principles to his team whenever he is back from a foreign journey,” said the official. Also, Mistry is known for his democratic style of leadership, freshness of ideas, emphasis on quality, ability to go for the impossible and concern for sustainability – pretty much the same qualities which helped Tata salvage the vessel.

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