On Episode 946 of The Core Report, financial journalist Govindraj Ethiraj talks to Hetal Dalal, COO at Institutional Investor Advisory Services (IiAS), as well as Amit Purohit, FMCG Analyst at Elara Securities.

SHOW NOTES

(00:00) Stories of the Day

(01:00) Tata Sons Chairman N Chandrasekaran Resigns, Group Stock Prices Fall

(04:21) Higher Food Prices Push Up Inflation To 4.45%

(05:31) Russia Is Importing Petroleum Products From India

(07:36) What Should Tata Group Company Shareholders Be Looking Out For?

(14:15) A CEO Resignation At Godrej Highlights The Larger Challenges In India’s Consumer Products Market

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NOTE: This transcript contains the host's monologue and includes interview transcripts by a machine. Human eyes have gone through the script but there might still be errors in some of the text, so please refer to the audio in case you need to clarify any part. If you want to get in touch regarding any feedback, you can drop us a message on feedback@thecore.in.

Good morning, it's Thursday the 13th of August and this is Govindraj Ethiraj broadcasting and streaming weekdays from Mumbai India's Financial Capital

Our top stories and themes…

Tata Sons and Group Chairman N Chandrasekharan resigns group stock prices fall

Higher food prices push up inflation to 4.4 percent

Russia is importing petroleum products from markets as far as India as Ukraine steps up bombing of its refineries

What should Tata Group Company shareholders be looking out for and should they be concerned with the latest changes?

CEO resignation at Godrej Consumer highlights the larger challenges in India's consumer products market.

Markets, Tata Sons and Inflation

They might not be much in common in the resignation of the Tata Group and Godrej Consumer Products given the former is a conglomerate amongst the largest in the country and the second is a single company in the consumer products space all by belonging to a old family owned business. Both N Chandrasekharan, chairman of holding company Tata Sons who resigned on Wednesday and Sudheer Sitapati of Godrej Consumer who resigned on Tuesday were professionals in family owned businesses.

The Tatas are strictly not a family owned business anymore and Chandrasekharan's appointment as chairman of Tata Sons by Ratan Tata and a near 10 year run in that position signalled a shift from a Tata to a non-Tata name. But could things be changing again? Chandrasekharan's resignation comes amidst uncertainty over his reappointment as director of Tata Sons and reported differences within the group, which in turn followed differences between him and Noel Tata, chairman of Tata Trusts, reportedly on the performance of some of the group's newer forays like e-commerce and aviation, which is Air India. Now, the Tatas in the last decade have stepped up aggressively in areas ranging from aviation via Air India to electric vehicles via Tata Motors, apart from electronics and semiconductors.

Now, back to the family, Noel Tata is the largest individual family shareholder in Tata Sons and is also the chairman of Tata Trusts, which collectively own about 66% of the equity capital of Tata Sons. As a background, in February, the Tata Sons board had deferred a decision on Chandrasekharan's reappointment as chairman after Noel Tata apparently raised these concerns. Now, more on this shortly, but there is no doubt better Q1 results notwithstanding, India Inc.

is facing considerable pressures. Tough market conditions can claim the scalps of the best of managers. And it must be noted or reiterated that the uncertainty that started with Trump's tariff wars in April 2025 has only got worse with the West Asia war and there is no real end in sight.

Doing and growing businesses in India is never easy and the present period is perhaps the toughest in recent times, importantly for factors that are beyond the control of most businesses. For the Tatas, Air India alone is proving the toughest to digest given its legacy problems and the general time it takes to turn around an airline, particularly one faced with the kind of headwinds Air India as well as the Indian aviation industry have been facing. Since the Tatas took control of the Air India group that includes Air India Express in January 2022, accumulated losses have now hit about 48,000 crore rupees, making it evidently one of the most potential ambitious corporate turnarounds and also now a large and unfinished project.

More on the Tata transition, shortly on Wednesday, oil prices were up after attacks on two ships reinforced worries about disruptions to Middle East supplies, Reuters reported, even as it quoted industry data showing rising inventories of U.S. crude, which might keep bulls in check. Brent futures were at about $89.80 or just under $90 a barrel on Wednesday. That also made it the sixth day of gains for crude.

In keeping with the stress and strain all around, the Nifty 50 and the Sensex fell for the second day in a row. Several Tata Group stocks also fell following news of Chandrasekharan's resignation and the Sensex, which was down more sharply during the day, recovered to lose about 187 points to close at 77,966 and the Nifty 50 was down 35 points to 24,435. In the broader markets, the Nifty mid-cap was up about 0.3% and the Nifty small-cap was down about 0.2%. India's annual retail inflation rose to 4.45% in July on higher food prices, though it's unlikely to trigger any immediate response in the form of higher interest rates by the Central Bank or Reserve Bank of India.

DBS Bank senior economist Radhika Rao told Reuters that the July inflation outcome was unlikely to materially alter the policy calculus. Food prices continue to normalise but pace should be gradual as sowing activity has picked up help by a narrower rainfall shortfall in August vs June-July. Rating agency ICRA's chief economist Aditi Nair said that they projected the CPI inflation to harden to 4.7% in August 2026 and cross the 5% mark in September 2026 as the Bayes effect turns unfavourable.

Overall, she said that CPI inflation or consumer price inflation is expected to average around 5% in the current financial year. In forex markets, the rupee was slightly higher thanks also to persistent Reserve Bank intervention that has helped steady the rupee according to Reuters which added that it ended at Rs 95.33 per dollar up slightly from Rs 95.43 in the previous session.

Russia’s Oil Shortage

Russia has started importing gasoline from as far away as India as Ukrainian attacks on its refineries trigger severe local shortages.

This is the first time Moscow has imported motor fuel from India according to Kepler data with the lengthy journey required an indication of how dire the crunch is becoming according to a Bloomberg report. The first shipment was received on the 5th of August and more may be on the way according to Kepler. Indian refiner Nyara Energy, earlier SR Oil which is also owned partly by Rosneft, Russia's top oil producer, has emerged as a source of the fuel which is being moved on a chain of Russian linked tankers via transfers of Egypt.

Rosneft owns a roughly 49% share in Nyara Energy which is like formerly SR Oil which is a 20 million tonne refinery and the second largest in India.

Russia produces crude and refined products for both exports and local consumption. A breakdown in the refineries means it cannot process the requirement of fuels like diesel and petrol for the local markets.

Following the waves of attacks, EA Analytics estimated that Russia's crude processing rates were running at about 3.6 million barrels a day in July, about a third below the seasonal norm according to Bloomberg which added that since Ukraine has intensified strikes hitting five processors last week and at least two more this week.

What Should Tata Group Company Shareholders Be Looking Out

Tata Sons chairman N. Chandrasekharan has said he will step down on the 20th of February 2027 which would mark the end of a 10-year run considered by most analysts as a solid one going by stock market performance of the main listed companies as well as the group's determined foray into newer areas like semiconductors. Chandrasekharan as Tata Sons chairman is also chairman of several major Tata Group companies like Tata Motors and TCS.

So how should shareholders of these companies view this transition? In the resignation letter Chandrasekharan said that he has completed 40 years of professional life at the Tata Group. He was earlier CEO of TCS and he also said that Tata Sons is a very large institution and there are many strategic projects that are under critical stages of execution and it is not only necessary to have a leader in place to lead the group beyond February 2027 but also clarity on leadership is important for employees, investors, partners and other stakeholders. He said adding he has asked the board to decide on the succession soon to ensure a proper transition even as he thanked all stakeholders for their support.

So how should Tata Group company shareholders view these latest developments in specific and general? I reached out to Hetal Dalal president and COO of Mumbai-based Institutional Investor Advisory Services which also advises on corporate governance and I began by asking her how she was seeing this transition in the Tata Group from her vantage point.

INTERVIEW TRANSCRIPT

Hetal Dalal: Couple of disclaimers, Tata Investment Corporation is one of IIS's shareholders. In my personal capacity, I own some shares in a couple of Tata companies, as most portfolios do, but it is not of any material level. To answer your question, if you are a retail shareholder or if you are even an institutional shareholder today, nothing really changes just because there is a resignation, right?

Again, the resignation will actually see fruit six months down the line. Tomorrow morning, nothing has changed and neither has today. The listed companies have strong leadership.

They have strong boards. They have strong businesses and operating models. So I think from a shareholder's perspective, there is no need to panic as of right now.

That's how I would put it.

Govindraj Ethiraj: Right. And if you are an institutional shareholder, let's say in a leading Tata Group company like Tata Motors or Indian Hotels or so on, what would the next step be, particularly in cases where, or TCS for that matter, where the chairman of TataSans is also the chairman of the company?

Hetal Dalal: As a new chairperson of TataSans gets announced, I think that person does take over. It also happened in the time Cyrus Mistry was removed, although that was a much more sudden reaction. This is far more planned.

You have six months till he actually goes, there's time to find a successor. So it's much more easy, it's much more planned. And therefore, there is likely to be a smooth transition into the chairman roles also for the seven large listed companies on which he's on the board.

Now, the question you have to ask is, will there be any leadership changes or will there be any material changes in these listed companies because of a change at the chairman level? There may or may not be. I think it depends, gets driven entirely by who comes in in the next seat and how they're able to navigate this particular change.

So I think it's again, a little too early to maybe react. Yes, it's a change, but it is planned and therefore it can be managed better.

Govindraj Ethiraj: Right. And now to come to the Tarasan's board itself, how are you viewing what's been happening for so long? In his resignation letter, he says that, you know, it's been six months and there has been no real movement and therefore he's left with no choice but to step aside.

Hetal Dalal: Well, any professional would react that way, right? If there is no certainty of a third term and when it was presented, the decision was sort of pushed forward. I think there is a certain degree of self-respect that one would have.

And therefore, maybe you also hear where the message is and from any sort of serious professional would possibly have the same reaction. What now needs to happen is when the board finds a successor, there needs to be, you know, really good alignment between where the trusts are and where Tarasan's board is. That alignment has to be very smooth.

Then you are likely to have a successor who will then succeed in the role. It's not an easy job, right? I think you're running one of the largest conglomerates.

A lot of what the Tata group does is sometimes is also pathbreaking and therefore taking some of these new projects, a lot of critical projects which are going to happen, and a lot of them get incubated in Tata Suns. So there's a very high risk capacity also which needs to be there. I think a lot of these play out and therefore it's not an easy role.

Also, there is this overhang of whether Tata Suns will be listed or not. So relationships with regulators and with Delhi are also critical to the role. So therefore, it's not an easy job.

And if there is six months to find a successor, I'm sure the board will reasonably think it through and find someone who will be able to handle some of these challenges.

Govindraj Ethiraj: Right. And you mentioned, you know, the investments in technology and of course, aviation, which seems to be one of the bugbears in this episode so far. What could the next leader be like?

As in, what would you feel the next leader or what are the key qualities that the next leader should have in order to fulfil some of these aspirations, group aspirations going forward?

Hetal Dalal: I think a very high risk tolerance. That's for one. I would think very good relationships with key regulators and with the government, which is extremely important.

Govindraj Ethiraj: Because you're saying these are all newer areas like semiconductors and so on.

Hetal Dalal: Correct. These are newer areas. And you know, a lot of this is now changing.

The world is also changing. You have a lot of technology, which is changing the world. And therefore, someone who understands or is able to grapple with not only has high risk appetite, but also the ability to deal with uncertainty.

Because it is an uncertain world far more than it used to be earlier. So I think that's really where I would think would be the temperamentally you need a leader. And of course, the other factors of running a large conglomerate and understanding businesses, being able to drive through what macro factors are going to happen and some of those particular issues.

But I think being able to handle uncertainties and having a high risk tolerance will likely be a critical element for the role of the chairperson of Tata Sons.

Govindraj Ethiraj: Right. So at this point, of course, we may not know better, but he would have finished 10 years in the role when he steps down. I mean, there could also be a possibility.

And I'm only asking that he stays on, isn't it?

Hetal Dalal: Theoretically, yes. But at a very practical level, I think no, it's hard to turn back the clock now. It's become public.

He's written out a statement. I think it's hard to turn back the clock now. So my sense is there's likely to be a change.

10 years, two terms, it's a good run. And he's accomplished a lot in that. There's been so much of value unlocking.

There's so much of capital, which has been freed up for the listed companies. The listed companies have performed significantly better from when he took over. So it's been a good run.

There have been significant successes to that extent.

Govindraj Ethiraj: Great. Hetal, thank you so much for joining me.

Hetal Dalal: Thank you.

What the Resignation of the Godrej CEO means for FMCG

Shares of Godrej consumer product fell to a three-year low about 11 percent down at 910 rupees in what Reuters called was the busiest session since May 2021. Analysts told Reuters that the sudden leadership transition does put greater focus on the execution of the company's growth plans with improved performance in its core brands seen as key.

This also comes after Godrej consumer executive chair Misaba Godrej on Tuesday said the company needed greater execution rigour particularly in online sales digital marketing and liquid vaporisers. A quick glance at the results last week Godrej consumer reported a roughly 11 percent increase year-on-year in consolidated net profits for the June quarter that's Q1 thanks to volume growth and exceptional performance in the African market which also tells us that India is not the only mainstay for the company. Total revenue was up 18 percent at about 4,225 crores but the larger question as we discussed a little earlier as well is how the overall consumer market is doing and what it will take or is taking to grow sales and profitability after all most consumer product companies have been growing only in single digits for some time now.

I reached out to Amit Purohit FMCG analyst at Elara Securities and I began by asking him how he was seeing the sector right now.

INTERVIEW TRANSCRIPT

Amit Purohit: So I think broader, at a top-down view, I think everybody is looking for growth. And idealistically, I mean, FMCG company, if you look at cycles, they have been growing in double digit consistently with a steady-state margin improvement. This playbook has kind of got impacted if you look at post-COVID and during the COVID period.

And you look at growth rates now struggling to touch the double-digit mark. Hence, margin improvement story may come in for a quarter or so, because of lower base effect or commodity up-cycle or downside. But structural margin improvement companies cannot drive that.

There are two challenges to it. One, I think, in general, most of these companies' portfolio, per se, where the consumer spends are also changing, right? So if you look at some of the new categories, in terms of D2C brands, the entire ecosystem that you are getting, that there is a change in basis, the online channel, quick commerce as a channel, which has kind of emerged and allowing many new players to enter into it.

Consumers, especially the younger ones, are resonating and far more experimental. So those things are actually broadly well-known. What I want to highlight is that intuitively what a company needs to do is now to look at the new vectors of growth, right?

So they know that the D2C brands may not be able to grow in double-digit or they may struggle to grow in double-digit, barring the few ones, but at an aggregate level. So hence, you need to build up a portfolio, which kind of gives you a comfort of double-digit growth. And most of these companies, I mean, few of them have been working on it.

So the ones who are working on it are the ones who are actually slightly better off. Even in the scenario of the last four years, five years, if you look at most of the companies have not done well in terms of whether it is earnings growth or whether there is a stock price performance. I mean, one important company to highlight is Marico, right?

So you see that Marico has witnessed a better P multiple, better return than many of the other FMCG names because they were kind of building it up earlier itself, all of these vectors. And now the narratives around the growth is far more stronger for Marico or for that matter, even Tata Consumer, which even if it is acquisition-led, the growth rates or the visibility of double-digit growth is there. So I think that's broadly about it.

Govindraj Ethiraj: Right. So one of the factors that seems to be common, since you mentioned Marico, is that they've all acquired, let's say, D2C brands and then, you know, sort of seeded or nurtured them within their existing universe or just outside their existing universe and then derived the growth from there. So are you saying that's perhaps the one thing that people could have done more of or including companies like Godrej, which they may not have?

Amit Purohit: Yeah. So I think building a new vector of growth was extremely critical. I think even Godrej had started to do that under Sudhir Sitapati.

If you look at yesterday also, I think Nisaba also indicated clearly that the entire TAM and broader roadmap was laid out pretty well by Sudhir in that sense. Now, the other thing is actually, if you look at the margins, right, there are other segments also or the ecosystem in which we are operating. There has been a lot of volatility in the input prices also.

You have Ukraine war, you have now the recent one, Middle East crisis, that has made it even more tougher, along with the fact that there's general slowdown or consumer shifting from some of the consumer categories and all that. And hence, it becomes very difficult to have a profitability part also. So you need to have a core portfolio, which ensures your profitability remains strong.

And then that gives you a muscle to invest into some newer categories.

Govindraj Ethiraj: As someone who's covering the sector, when you are looking for, let's say, growth companies, I mean, I think you've sort of hinted at that a few things already. But what would be your asks from a company or what would make you put money on a company at this point of time in this market?

Amit Purohit: I think the clear thing when you look at this sector, I mean, underperformance is known by everyone, right? We've been seeing this for quite some time. There is nothing new that I can talk on that.

Important point is that what is it that at least gives you a double-digit revenue growth, a little bit of margin improvement, which ensures me a comfort on an earning stagger, which is double-digit also. I mean, which company can provide me that? And that is a very critical thing.

So you have companies which are Nestle of the world, where the business model need not change significantly because they have a very good low-penetration category portfolio, which itself is scaling up. So if you look at from a Nestle, they didn't have to do anything in terms of building a new vector of growth. Their internally vectors are pretty, probably strong enough to go.

They just have to focus more on the distribution, new channel and all that, make it more available. And that helped them to grow. And there is still a visibility of growth.

But for the companies which are especially on the non-food side, you would find it far more difficult because if you look at it, the non-foods guys had a bigger impact driven by D2C brands at the initial site. Because in food actually, there are many very, very niche categories. In the non-food, the entire BPC segment, that's scaled up pretty well.

Govindraj Ethiraj: Right. And a lot of all of this is hitting or is facing headwinds from an economy where consumption is obviously not growing at the pace it used to grow earlier. And that's, I guess, a fundamental challenge.

Do you feel that that could change? I mean, so far, we've been talking on the supply side in a way, but on the demand side, do you think things could change? I mean, are you seeing or are there other sort of signals from the demand side which suggest that there could be newer vectors that could be possible of growth in the way you defined it?

Amit Purohit: So I think, I mean, growth vectors will be driven by company specific strategy, right? So I mean, opportunity for growth is there. It's how the DNA of the company and how they think about growth and which sector to get into it.

But at the aggregate level, the demand environment at the margin has started to improve. If you look at it over the last two quarters, Q1 has been resilient. Q2 also seems to be good.

And it's not just restricted to consumption FMCG per se. You look at two wheeler demand has been good. Even Titan reported very strong numbers.

So those things are in place. So generally per se, consumption trends are not that very, very alarmingly, you know. I mean, obviously there could be a challenge when you look at El Nino, how they shape up and all that.

But over a medium term perspective, I think demand for consumption generally would remain decent enough. It's just that specific company will have a different portfolio or ability to build a new vector that will tend to outperform. And it could also be because of the positioning of that company.

If you are a non-food company, it becomes very difficult for you to then scale it up. And so those acquisitions will become a priority.

Govindraj Ethiraj: Right. Amit, thank you so much for joining me.

Amit Purohit: Thanks for having m

Disruptions in Europe’s Nuclear Reactors

A hot and very dry summer has disrupted Europe's nuclear power plants prompting governments to take extraordinary measures to keep energy supplies running according to a CNBC special report. In France where nuclear energy provides about 70 percent of the country's electricity utility provider EDF said yesterday that it had cut output at multiple reactors due to environmental issues.

EDF also shut down three reactors at its Gravelines nuclear power plant in northern France earlier in the week due to a massive influx of jellyfish triggering automatic preventive measures. Europe's example also highlights the challenges that energy and nuclear power could face in future at a time when there are extreme weather shifts and that of course includes countries like India where there are ambitious nuclear plants but energy in general requires many more resources to keep running particularly from a cooling standpoint. In Hungary the government has finally seen some rainfall which has helped lift water levels on the Danube allowing it to restart another turbine at its Pax nuclear power plants at the CNBC report.

Two of the power plants eight turbines are now producing electricity again the government said which offers some relief to a facility that supplies nearly half of Hungary's electricity. In Romania the state-owned nuclear power producer warned it may shut down its last working reactor as soon as Thursday as water levels on the Danube continue to fall. The Danube runs for about 1,770 miles.

Romania has already declared an energy emergency through August and has taken unprecedented measures including dredging the channel. Romania has already declared an energy emergency through August said the CNBC report adding that it has taken unprecedented measures including dredging the channel and sinking rock-filled barges. The two reactors of Romania's one active nuclear power plant typically supply about 20 percent of the country's electricity.