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BREAKINGVIEWS-Tata's new chief is good step toward redemption
January 13, 2017 / 3:15 AM / a year ago

BREAKINGVIEWS-Tata's new chief is good step toward redemption

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Una Galani

HONG KONG, Jan 13 (Reuters Breakingviews) - Tata has taken a first step towards redemption after a demoralizing boardroom brawl. IT whizz Natarajan Chandrasekaran will be the new chairman of the $100 billion cars-to-salt conglomerate. He is the closest thing to an outsider to hold the top job at the group’s holding company, Tata Sons. The appointment gives the group a realistic shot at fixing thorny governance issues. He can also help his own successor at key unit Tata Consultancy Services in the event the United States cools on crucial work visas.

Chandrasekaran signals both change and continuity. He does not have significant investor relationship with the holding company, whereas the family of ousted predecessor Cyrus Mistry holds an 18 percent stake in Tata Sons. That stake is second only to the charitable trusts led by group patriarch Ratan Tata - the man who hired then effectively fired Mistry, setting off a spat in which Mistry publicly railed against Tata management. Chandrasekaran is also the first to hold the position who does not hail from the tight-knit Mumbai Parsi community.

Yet he also knows the group intimately. He served as chief executive of crown jewel Tata Consultancy since 2009, and sales almost quadrupled under his watch. The software company is now India’s largest by market value. Given the boardroom spat, and uncertainty over how much power a new chairman might really wield given Ratan Tata’s influence, it would have been tough to find an outsider as respected as Chandrasekaran.

The new boss has a long to-do list to earn the market’s respect. He needs to credibly address the alleged governance lapses outlined by Mistry. That may require resetting Tata Sons’ relationship with its investors, and revamping the board of the holding company, which looks too cosy altogether.

He will also need to support his successor at Tata Consultancy, where Chief Financial Officer Rajesh Gopinathan will take the helm. The outsourcing firm is grappling with poor top line growth and worries that U.S. worker visas could dry up under the immigration-sceptic administration of Donald Trump. The American market accounts for around 60 percent of revenues for Indian outsourcers; leaving Gopinathan to sink or swim would be inadvisable. Chandrasekaran is a decent choice at a difficult time for the Indian giant.

On Twitter twitter.com/ugalani

CONTEXT NEWS

- India’s Tata conglomerate named Natarajan Chandrasekaran as the new chairman of its holding company on Jan. 12.

- Chandrasekaran, 53, will take over as executive chairman of Tata Sons on Feb. 21. He will step down from his position as chief executive of IT outsourcing giant Tata Consultancy Services, a position he has held since 2009.

- Tata Sons scheduled an extraordinary general meeting on Feb. 6 to remove Cyrus Mistry as a director from the board. Mistry is challenging that move; he was ousted as the chairman of Tata Sons on Oct. 24.

- TCS Chief Financial Officer Rajesh Gopinathan will replace Chandrasekaran as chief executive of the IT group.

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Editing by Pete Sweeney and Nicolle Liu

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