Execution will be Chandrasekaran's biggest challenge in his second term at the helm of Tata Sons

As great athletes strive to surpass their records, N Chandrasekaran's second term will involve bettering the benchmarks he set in his first stint, said a Tata Sons board member.

Chandra has been a lucky general for the Tata Group. In his first term, the Group made some outsized bets through acquisitions in the steel and digital businesses. A supercycle in the steel industry will put Tata Steel on a par with profits at the Group's most valuable firm - Tata Consultancy Services.

Under Chandra's charge, capital allocation in the steel business has worked beautifully. His second term will be measured against how well he navigates Air India out of turbulence and a glitch-free profitable roll-out of the Group's new-age digital businesses.

Over the past three years, Tata Sons has infused Rs 20,000 crore of growth capital in group companies even as legacy issues in telecom and power and a challenging global business environment have kept Chairman Chandra rather busy.

His capital allocation has been efficient, with one leg in the legacy businesses and another in future-funding businesses. "Managing the power dynamics in the group, the chairman will have to navigate his way to growth skilfully," a senior group official said.

While his first stint focused on stabilising the Group's businesses, Chandrasekaran will now likely focus on growth. Tata Steel's profits will take care of the capex the steel business needs. Tata Sons, the main holding company, and Chandra must now need to balance the capital allocation needs of its other businesses.

Chandra has taken some bold bets by acquiring Tejas Network, a telecom gear company, and has invested in new-age online businesses– Big Basket, 1MG and Curefit - to fill up the missing pieces in the jigsaw puzzle for its proposed Super App. Steering these businesses to profitable growth will be among his main challenges.

Other challenges include launching electric vehicles by Tata Motors and JLR and integrating Air India with its existing airline businesses.

Observers thus say Chandrasekaran's biggest challenge will be execution.

His M&A team, a core part of Tata Sons, has done its work. He will now have to hire an execution team to implement his strategy. "Strategies can only be good if execution is done well. And that requires building a strong execution team. He will centralise accountability and will have the power to do so, and that may work well. For new business additions such as Air India or Tata Digital, execution will be key," says an insider.

“Consumer business has also not been a strong forte of the Tata Group, which has specialised in industrial businesses and services. So, getting the consumer app to be successful in a space where it cannot but compete with Reliance in the marketplace is important," the same person said.

The Tata group is like an Octopus; it takes a while to understand the moving parts, a group official told ET. Chandrasekaran took two to three years to understand the moving parts and evaluate challenges and opportunities.

People agree Air India will be a distraction. It will need management bandwidth, capital allocation, and rapid integration. For the Flag carrier, Chandra will have to build a team from scratch and provide leadership. Consolidation of the existing ventures will also be critical.

Chandra, people who have worked with him in the past, believe is not prone to making kneejerk moves. "Chandra will not be in a hurry to hit sixes...it’s a marathon which he excels in," said a person who has watched his career closely.

Management Bandwidth
Tata Sons management bandwidth will be on getting Tata Digital to launch the app and fly Air India out of turbulence.

"While work is consistently being done on the app, the Air India deal has also taken up maximum attention from the holding company's management team. By the first quarter of 2022, we should be comfortably able to place it for public usage," said an official close to the matter, seeking anonymity.

The Group is putting various offerings across eCommerce, financial services, fashion, lifestyle, among others, to create a loyalty programme for its 45 million-plus customers, which will help them use the Tata ecosystem of services and goods.

Experts said that bringing disparate consumer profiles of listed and unlisted companies on a single market platform for loyalty sharing won't be easy. Indian Hotels, Croma, BigBasket, 1mg and one of the group's insurance firms are among companies that have already signed up on the SuperApp.

Chandrasekaran has been juggling capital allocation between write-offs and chasing growth. The Group has been investing heavily in its flagship businesses of steel, vehicles and power, though the benefits of these investments are still work in progress. Between FY17 and FY19, Tata Steel, Tata Motors and Tata Power have together employed Rs 74,000 crore in their businesses, even as consumer-focused group companies such as Titan, Trent, Indian Hotels and Tata Consumer grew faster than them.

The Group's largest company TCS’ market capitalisation has increased almost 80% since Chandrasekaran's appointment.

"This is a Test match for us, and we have to keep moving," a senior Tata Group Director said. “What we are seeking to do is create a balanced portfolio that will have capital intensive businesses, consumer businesses and new-age businesses," he added.

Group watchers said the chairman would need five to seven years to get the Group on the road to growth.

"Competitors are making rapid progress in putting EV products in the market. The (JLR) brand needs to catch up fast in the luxury EV space," V G Ramakrishnan, MD, Avanteum Advisors said.