Tata’s “Jewel”

Ratan-TATA

The Story Behind Tata

The most prestigious name in the Indian business scenario has called it a day. Ratan Naval Tata passed on the command of the Bombay House to Cyrus Mistry as he decided, at the age of 75.

He had retired a decade back in 2002, at age 65, when the company decided to make him a non executive chairman of the Tata Group, thereby rendering him eligible to continue for five more years. When that time elapsed, the retirement age was again extended for five more years. Ratan, the jewel for the Tata group was indispensable, undoubtedly.

Educated at Cornell, he would have stayed back in the United States of America as he had an offer from IBM. But JRD Tata’s nephew and group chairman Naval Tata’s son was destined to be a part of the family business. He joined the family business in 1962, as one of the several thousand shop floor employees at Tata Steel in Jamshedpur.

It would be nearly a decade when he would get something, as he was put in charge of the troubled Nelco (National Radio and Electronics) in 1971 which had shown losses as high as 40 percent. Unfortunately for him, when things just started looking up, the “emergency” was declared, and with labour issues, Nelco was back to square one. His next assignment was to help revive the sick Empress Mills. He had that, but was refused the 50 lakh rupees necessary for its revival. The mill finally closed down in 1986.

Ratan Tata’s criticisms grew, and his baiters led by Russi Modi blamed Nelco’s and Empress Mills’ collapse on him, conveniently ignoring that both had been caused mainly by factors which were beyond his control. The criticism grew to a new level when JRD stepped down as the chairman of the group in 1981 and named Ratan as his successor, only to have his detractors think that but for the Tata surname, he was not worth much.

Ratan Tata drew up a new strategic plan in 1983, anticipating expansion of capital markets. His plan emphasized on venturing into high tech businesses, focusing on select markets and products, mergers & acquisitions. He promoted seven such companies in the same decade — Tata Telecom, Tata Finance, Tata Keltron, Hitech Drilling Services, Tata Honeywell, Tata Elxsi and Plantek. But his plans found a cold response in many of the group companies, most of which were run as de facto independent units. All the progresses in them were made independent of him.

In 1988, he took over as Telco chairman, amidst the worst labour dispute in Tata’s history. He stood firm and the dispute was resolved in the company’s favour. Three years later, he implemented the retirement age rule for the board of directors and business heads, and this took care of many of his detractors. The economy opened up in 1991, and his peers at Bombay house were not very enthusiastic about this new change which took away the protectionist policies of more than four decades.

He drew a new plan in 1991 in place of his old plan. He gave prominence to technology, and made global competitiveness the motto. McKinsey group was hired for reorganization. Multiple, overlapping group companies were brought in under one roof, and by 1998, there was a single group logo and Tata belonged to Tata Sons, who now held the sole authority on the use of the brand name.

Tata exited from its once established sectors like cement, textiles, pharmaceuticals and cosmetics and entered new businesses like telecommunications, finance and retail and preference was given to IT and renewable energy. Today, TCS is the most profitable company in the IT sector.

Tata Group’s global expansion started in the year 2000 with the acquisition of Britain’s largest tea firm, Tetley, by Tata Tea, now called Tata Global Beverages. From the year 2000 to 2010, more than $18 billion was spent to acquire more than 22 companies worldwide. Tata Steel also acquired Europe’s second largest steel maker Corus in 2007 for $12 billion. The company is now called Tata Steel Europe. These acquisitions also include a controlling stake in government-run Videsh Sanchar Nigam Ltd (VSNL) by Tata Sons, purchase of heavy vehicles unit of Daewoo Motors in South Korea by Tata Motors, acquisition of Singapore’s NatSteel by Tata Steel and purchase of New York-based The Pierre hotel by Indian Hotels Company. Jaguar Land Rover, a personal favourite of Ratan Tata since his young days, was acquired for $ 3 billion.

Before he became the chairman, less than 5 percent of Tata’s earnings came from overseas. Today, it is the largest Indian multinational conglomerate; more than 65 percent of its income comes from overseas. Tata group has, till now 98 operating companies spread across 56 countries in six continents. Tata Group’s market capitalisation, which has some 30-odd listed companies, is now nearly 4.54 trillion rupees ($825 billion), 33 times more than in 1991 when Tata took over the top job. During this period, the group’s aggregate sales have increased 43 times, while net profit has grown 51 times.

In 2008, he was awarded India’s second-highest civilian award, the Padma Vibhushan.

But of course, he has not been without controversies, namely various environmental issues flouted by the group in the case of the port at Dharma (Orissa), which is near protected wildlife areas. Or about the Nano plant withdrawal from Singur, WB and going to Sanand, owing to farmers protest over inadequate compensation for their land.

What makes him so different from other Indian businessmen who began in the license permit era?

The very fact that he turned the biggest relic of the license permit raj into a global company in little more than a decade. Not to mention, where behemoths like Birla could not stand the changed business scenario and promptly broke up into little factions, Tata grew beyond its wildest dreams, acquiring overseas businesses, a fact which would have been impossible for any Indian enterprise for most of the 20th century.

On the one hand he acquired luxury brands like Jaguar Land Rover, and on the other he also strived for the development of the world’s cheapest car, Nano and the first car designed in India, the Indica (which has been Tata Motors biggest success till now, and still going strong). While Laxmi Mittal’s takeover of Arcelor is still causing problems, Tata’s bid for Corus hardly raised any concerns, and that speaks about the goodwill that the group has built beyond India’s borders. Most of his now hailed successes, like the Corus and Jaguar acquisition were predicted to bring the company’s doom and bankruptcy. But that was wrong, because after all, Tata has been among the very few to perfectly understand the pysche and the needs of the Indian consumer — and build successful businesses around those insights.

For those who think that he is now going to lead a full fledged pensioner’s life, think again. He still heads Sir Dorabji Trust and the Sir Ratan Tata Trust, which control nearly 60 percent of the group company. It’s very logical that he is in no mood to rest on his laurels.

Ankur Jayawant

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