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Growth cannot come without risks: N Chandrasekaran


Steel was one of the big pressure points for the group when he took charge 18 months ago. Today, Tata Sons chairman N Chandrasekaran tells ET he’s happy with where the company is and confident of even better results once all the restructuring is over. Edited excerpts.

What was your first impression of the steel business when you took charge?

I had three observations, which I presented to the board. First, debt was high and we couldn’t resolve it without solving the European problem as they were interlinked. I felt the best way was to separate the European business. We also had to look for ways to simplify operations — by reviewing the portfolio — and exit all investments that were not core or not giving us the desired returns. Portfolio streamlining was essential to achieve the eventual goal of deleveraging the balance sheet, creating agility and financial capacity in the Indian business to be able to expand.

We have been very careful in creating the Thyssenkrup joint venture — (it) will have a sound performance. There’s a clear opportunity in India, which we had not taken advantage of for a variety of reasons. We decided we would go full steam ahead organically, and then the IBC (Insolvency & Bankruptcy Code) window came.

So IBC was an opportunity at the right time?

You can’t make these bets when the opportunities come up. You can either say we will wait to fully deleverage the balance sheet, or you have a path and superimpose this to see how best you can absorb it. These are one-time opportunities. Greenfield projects are not easy to set up.

The IBC process didn’t start well; you lost out on Electrosteel. What’s the learning?

I have always said, you have to run your race. You should not run somebody else’s. (If we are) clear about what we want and at what terms, we are fine. The moment we lose that perspective and start competing, things can go wrong. You need to know what is good or you. You can’t be reacting to others. There are lots of opportunities. There are some must-dos. But if you miss it, you miss it. Would we have been happy to get Electrosteel? Yes. But I am also learning. It’s been 18 months for me (at the group’s helm). (They are) all different businesses, so it’s been pretty educative.

But you went after the assets with elaborate planning. There were at least 3-5 large opportunities, all at the same time…

We took a call. We must go and get whatever is a mustwin. We can’t share all the details of how we came up with our price and other confidential details.

But in an auction situation, how do you ensure you don’t overbid?

That’s a call you take. You have to have the stomach to do what is needed and be risk-averse. Growth cannot come without risks. But even where you take that risk, you need to be prudent.

Several group companies need capital. Sitting at the top in Tata Sons, how do you allocate capital to fund acquisitions?

We did not have to put in capital. We only had to do the rights issue — which we would have even if we were not buying Bhushan Steel —because we wanted to bring down debt. We believed one of the bids would come through. We had to send the right message to the market that we are fixing the balance sheet and are behind this business. I do believe Tata Steel — once all the restructuring is over — will produce good results. I have full faith in the business. I know what Ebitda levels we will achieve, where debt levels will come to and we will produce cash flows. It’s not been an emotional decision.

Would it be wrong to say that from a strategy of exit Europe, it’s now consolidating Europe and growing?

I don’t know what the previous thinking was, but the way we have structured the company in Europe, I have all indications it will generate good Ebitda and free cash flows from year one. I think it’s a viable and profitable business that will pay dividends.

What’s the progress in Bhushan and Usha Martin integration of operations and financial management?

We won Bhushan Steel. The Tata Steel team has taken charge and first quarter numbers are already integrated in some form. We saw another opportunity in Usha Martin for its location and product offerings. We have also announced Kalinganagar phase II expansion.

So, the intent is to create capacity and a very strong execution focus to make sure Tata Steel profitability is not only good in times of a good steel cycle but also during other times.

They are focusing a lot on operating economics. It will improve the deployment of digital to build down costs further. I am happy with where we are in Tata Steel. Some would argue that we are lucky because of the steel cycle but at the end of the day, you take strategic decisions and factor in both good and bad times. You don’t go overboard in good times but create an operating structure that will see you through in difficult periods too.





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