With Cyrus Mistry Gone, What Will Happen to Rakesh Sarna?

WITH THE surprise exit of Cyrus Mistry from Bombay House, Taj insiders are wondering whether the next in the line will be the group's CEO, Rakesh Sarna, who only recently completed two years in his new role after spending 35 at the Hyatt Corporation.

The rationale behind the theory is that Sarna is Mistry's most high-profile appointee brought in from outside the Tata ecosystem -- his annual compensation is the second highest among Tata CEOs, after N. Chandrasekharan of Tata Consultancy Services (TCS). Sarna's appointment took corporate analysts by surprise because it happened without forewarning in the first year of a five-year extension that had been granted to his predecessor, Raymond Bickson, who was responsible for dragging the bottomline of the hotel business deep into a sea of red.

Bickson, in the ideal world, would have been succeeded by the then executive director, Abhijit Mukherji, who was said to enjoy the blessings of both Ratan Tata, who returns to Bombay House as interim chairman, and his confidant, R.K. Krishna Kumar, who, though he's no longer on the Tata Sons board, is a trustee with the Sir Dorabji Tata Trust and Sir Ratan Tata Trust, which together are the principal stakeholders of the parent company, and also a director at RNT Associates, the company Tata spawned to fund start-ups. Mukherji was the first senior executive to be shown the door after Sarna's elevation.

Punters betting on Sarna's exit are talking about his inability to contain the company's losses -- IHCL's consolidated net loss for the quarter ended June 30, 2016, according to the Economic Times, was Rs 166.57 crore, compared with a net loss of Rs 56.94 crore a year ago. They are also reviving the talk, which became quite a voluminous social media whisper some time back, about "ethical issues" involving a woman executive.

My two bits on the speculation is that Ratan Tata will be interim chairman for four months, which will be consumed by the search for a new chairman. Will he really have time for IHCL matters? Wouldn't he rather leave it to the new chairman to take a call on the IHCL leadership, if at all there's need for one? And why would he want to bring back a discredited former regime back at the helm of IHCL?

A self-made success story who grew up in New Delhi's post-Partition middle-class Punjabi neighbourhood of Malviya Nagar, Sarna spent his first year re-empowering general managers and putting a re-energised management structure in place, even as he contended with the daunting task of cleaning up the financial mess left behind by his predecessor's penchant for making expensive trophy acquisitions overseas. And he imported Chinmai Sharma, a revenue management who was then working with the Starwood Capital Group in Paris, to revamp the group's digital platform and loyalty programmes. The first objective has already been achieved at lightning speed and is evident from the group's evidently dynamic website.

Sarna now needs time to rebuild his flawed inheritance and he's already working towards an 'asset light' model, which I have reported previously (see link below), to achieve this end. His efforts have led to a substantial drop in losses, but of course the company is still in the red. He has, moreover, just unfolded the chain's most ambitious brand-building campaign called Tajness, which is expected to deliver tangible results across all Taj addresses by 2017-end.

Those waiting to see Sarna fall are not likely to be obliged soon. Unless Ratan Tata, abandoning his famous prudence, is in a terrible hurry to see black back on the balance sheet.