A month after ousting Ajit Kerkar and assuming charge as chairman of Indian Hotels in a controversial management battle, Tata group chairman Ratan Tata informed largely supportive shareholders that he intends to revamp the companys functioning.
On the anvil are plans to refocus the companys future strategy, undertake a major review of international operations and upgrade services and facilities.
Addressing Indian Hotels shareholders for the first time as chairman yesterday in Mumbai, Tata added that he would formulate a code of conduct for the entire Tata group to make it more cohesive and united. The move was demanded by some shareholders who expressed misgivings over the Kerkar episode, despite assuring Tata of their full support.
Realising the need to make a statement before shareholders bombarded him with questions, Ratan Tata acknowledged Kerkars contribution to Indian Hotels, but accused him of misusing his position and committing several irregularities.
We felt Indian Hotels was not functioning as other Tata group companies. Several decisions were taken which were not in the best interests of the company. As a director, he (Kerkar) was not fulfilling his responsibilities, explained Tata.
The boards decision to oust Kerkar from the chairmanship was taken after great consideration. After stepping down as the chairman and managing director, Kerkar would no longer be the non-executive director of the company as would have been the normal case, said Tata. Kerkar has stepped down from the board of Indian Hotels, its subsidiaries and associates in India and abroad.
Appearing on the dais at Mumbais Birla Matushri auditorium sharp at 3.45 p m yesterday, Tata looked calm but nervous. However, any apprehension he may have felt rapidly dissipated as a majority of the 800 shareholders who had packed the hall supported him.
Tata was cheered when he made his entry, flanked by Tata Sons director Nausher Soonawala and Indian Hotels managing director R K Krishna Kumar. A similar response greeted Tata Sons director Nani Palkhivala, who played a crucial role in Kerkars ouster.
Addressing the shareholders, Tata said the time had come to refocus operations and upgrade service and facilities. Some years back, our hotels in Delhi were ranked the best in service, but today, Oberoi and Maurya Sheraton have overtaken us, he rued. The future focus would be on improving the companys service, rather than expanding its operations, he added.
Tata said the company has logged a four per cent rise in sales during the first half of 1997-98, compared with the same period in the previous year. Sales increased despite a drop in the occupancy level of the companys hotels from 57 per cent to 54 per cent.
The company plans to recast its global operations to place them on a firm footing. Indian Hotels will also refurbish its hotels in the UK and in the US to compete in the new environment. Currently, we dont have a good brand image abroad, added Tata.
Back home, the company has been awarded the Rs 725 crore conventional centre at the Bandra-Kurla complex. The project will come before the board for consideration once the viability is examined, Tata said who played a crucial role in Kerkars ouster. Tata said Indian Hotels had done very well under Kerkar, but the focus had been on expansion. As a result, the company had become the countrys largest hotel chain. But only five properties contributed nearly 80 per cent of the revenue, while the rest were a drain on the company.
The company is also planning to restructure itsoperations in the US and the UK to compete in the new environment. In an obvious dig at Kerkar, Tata said IHL had made a number of investments abroad but they suffered from poor brand image and inadequate facilities.
Brushing aside speculation that IHL could not be run by a person without any prior experience in the hotels business, Tata asserted: I want to demolish this myth. Indian Hotels will be run by a competent manager from within or outside the company. Tata also said that the brand royalty scheme had not been abandoned but was being fine-tuned to accommodate shareholders interests.
