As Ratan Tata steps down from all
group enterprises and the holding company, Tata
Sons, I go back to 1991 when he took over from J.R.D.
Tata. At the time, it was an unwieldy agglomeration
of over a hundred firms engaged in everything from
textiles, printing and seeds to hotels, software,
trucks and steel. While Tata Sons exercised some
control over the companies, in most cases the actual
share ownership was dangerously low; many failed to
earn a return that covered the cost of capital; most
were devoid of strategic focus; and some were run by
powerful satraps such as Darbari Seth, Russi Mody
and Ajit Kerkar who enjoyed J.R.D’s trust and thus
answerable to none else, certainly not a child in
his early 50s.
For the first few years, Ratan watched and waited,
presiding over a board of ancient mariners at Bombay
House while international consulting firms advised
him to sell most businesses in the name of ‘core
competence’. Then he started to move.
The first was getting rid of the satraps. Darbari
went quietly; Russi made a big fuss; and Ajit’s exit
created some embarrassment. This was accompanied by
getting some key people on to higher tasks at Tata
Sons, such as insiders like his consigliore Noshir
Soonawala and R.K. Krishna Kumar as well as
outsiders like R. Gopalakrishnan, Alan Rosling and
Arun Gandhi. The next steps were threefold: (i)
focus on the key companies and get them to earn
better returns; (ii) define a Tata group with common
values and brand, and get a royalty fee from each
Tata enterprise; and (iii) drive greater growth and
profits of TCS, then a part of Tata Sons, to
generate cash for increasing shareholding across the
group to a minimum of 26%.
Then came the listing of TCS and the global
acquisitions, which began in 2000 with Tata Tea
buying Tetley of the UK for £271 million. This was
followed by several sub-$1 billion deals until 2007
when Tata Steel won a nail-biting auction for Corus
at £13 billion. That year saw Tata Power and Tata
Chemicals making key buys. Then came Jaguar-Land
Rover (JLR) in 2008 for £2.3 billion. Some
acquisitions have become successes such as JLR;
others have quietly done well; still others like
Corus are experiencing difficulties. However, the
fact is that in 2011-12, almost 59% of the group’s
consolidated revenues of $100 billion came from
international businesses.
In between was the turnaround of Tata Motors from a
truck maker to a producer of popular passenger cars.
The jury is out on the Nano; but there is no
doubting the success of the Indica and the Indigo.
There are some things that Ratan could but didn’t
do. For one, he didn’t divest enough. He could have
better defined the areas where the Tatas should be,
and weaned the group off the rest. For another, he
could have been more clinical about return on
capital across the businesses. His successor, Cyrus
Mistry, will probably focus on these issues — not
only because he is younger but also since he owns
18% of Tata Sons.
I have three dominant images of Ratan. Driving his
own car in the evening. Not having a dozen flunkeys
hovering around him at airports. And standing day
and night outside Taj Mumbai during 26/11, until the
police took full control and the last of his guests
had been evacuated.
Ratan Tata created today’s Tata group. That’s the
plain truth. Hats off for that.
Published: Business Standard, December
2012
