As finance director, Tata Sons, member of the Group Executive Office and chairman of Voltas, Ishaat Hussain's mission is to increase shareholder value.

In his over 30 years with the Tatas, he has seen the group's transition from the days when it operated in monopoly businesses to the era of intense competition that we live in today.

In this interview with Christabelle Noronha, Hussain says the key to any successful business always was and will always remain customer orientation, and discusses the new challenges facing the Tata Group.

Christabelle Noronha: Over the last couple of years, the Tata Group has embarked on a plan to realign its portfolio. The sale of ACC is in line with this effort to refocus, as was the decision to sell Tata Steel's cement plant to Lafarge and Tomco to Hindustan Lever. What would you say was the reasoning behind these divestments?

Ishaat Hussain: The group has, in some form or the other, been realigning its portfolio since the early 1990s. It is only in the last three years that this has been done in a very structured manner. The divestment of Tomco and Tata Steel's cement plant was a conscious decision. It was Tata Steel's decision to concentrate on steel and get out of the cement business. As for Tomco, the company had reached a point where it required immediate attention, not only in financial terms but in terms of management as well. The group felt that it did not have the requisite managerial skills in the specific area where Tomco operated and hence decided to hive it off.

In the case of ACC, the Tata Group was interested in increasing its holding to a level where it could intervene more effectively with the operations of the company. When this was sought to be done by way of a preferential issue, it did not get the necessary support. We believe this was unfair but, after being thus thwarted, we felt there was no point in our continuing with a 14 per cent stake in the company.

CN: You have been quoted as saying "We want to be in businesses with growth potential" -- does this imply that the group will get out of the old economy brick and mortar businesses?

IH: Any business investment proposal needs to be evaluated within the context of the growth potential of the business as well as its profitability. Certainly the new economy businesses are on the threshold of high growth and profitability and we would be interested in investing monies into these sectors, but it is my belief that many of the so called brick and mortar businesses have very good growth potential, whether it is steel or trucks.

At the moment, large parts of the brick and mortar economy are showing signs of over capacity, so I don't see any major investments being made in this area; but, as and when the capacity starts getting used up -- and the demand projections are good -- then we will continue to also invest in the brick and mortar businesses.

CN: How do you see the future of the new economy businesses, especially the dotcoms?

IH: The new economy businesses are slated to grow at a strong pace but you have to be very selective.You have to understand the business and get into those segments which have a truly sustainable growth rate with, more importantly, sustainable revenue models. I think this is an area where one has to be very agile and flexible and take risks on a number of fronts in the clear belief that some will succeed and some will not.

CN: Which of the new economy businesses will the Tata Group be investing in?

IH: We have made a very substantial thrust in the telecom business. Tata Cellular is a very successful cellular operator in Andhra Pradesh and is now merging with Birla AT&T. We have also almost finalised a 51 per cent stake in Madhya Pradesh for cellular services. As far as fixed line telephony is concerned, we are beginning to get our act together in Andhra Pradesh but this is a very capital intensive industry.

Having gone down the telecommunications road you perhaps are aware that the telecom industry in India continues to evolve. itself is in the throes of definition. Recently, the government announced the national long distance telephone policy; a whole lot of initiatives have been announced in broad-band. So, the scope of the industry is being expanded virtually every month , offering new opportunities for investment .

In each new segment that is being evolved, we seem to be already well positioned. In broad-band, for instance, Tata Electric Company has a pretty substantial fibre optic network between Mumbai and Pune. I think all this will give us a good springboard for the national long distance telephony.

Then of course there is the whole internet space. We are in the process of launching our own ISP which will operate in both the B2B and B2C space. The other area of the new economy is IT services where we are a very significant player through Tata Consultancy Services. We have a successful world-scale operation here.

CN: What are the group's plans for the IT sector? Are there any plans to consolidate the IT companies? Will TCS be spun off as a separate company or will it go public?

IH: There is a lot of value in TCS which cannot be ignored. We have yet to decide how this value can be unlocked for the benefit of our shareholders.

CN: What is the status of the Tata, Birla AT&T venture?

IH: The boards of Birla, AT&T and Tata Cellular have approved the merger of the three companies. There is a certain process to be followed in consummating the merger which includes a meeting of the shareholders . If all goes well, we hope this merger will be in place by January 2001.


CN: Most Tata companies have not been performing upto the mark and this has been a cause for concern among shareholders. What will the group's long-term plan and strategy be to ensure that group companies notch lead positions in their respective businesses?

 IH: The performance of our companies is definitely one of the more important roles of the GEO. We track the performance of companies, as well as continuously raise the bar. Having said that, I would like to add that some of our companies have performed exceptionally well. Tata Steel, for instance, has performed extremely creditably in a difficult market. It has reinvented itself, modernised its production facilities in a very cost effective manner and set itself the goal of becoming the lowest-cost steel producer in the world. It is my impression that it is well on its way to
achieving this.

There have been other instances of turnarounds in the group. Voltas and Forbes are two examples, among other companies. On the other hand, there are a couple of companies where our performance continues to be a cause for concern, not only among the management and the GEO but also amongst the investor community. I can assure you that it is receiving our serious attention. As a general hypothesis, I would like to say that in the last five years, the group has accepted the challenge before it — a challenge which confronts all Indian companies — to improve the quality of its products and services, improve its customer orientation and cut costs dramatically.

Through the JRD QV process we are addressing this issue in a systematic manner so we can quantify and measure our progress. I'm quite sure that, as and when the economy exhibits a sustainable industrial growth rate, you will find all our companies falling in line with market expectations.

CN: What steps is the GEO taking to ensure that companies notch lead positions in each of their business segments?

IH: The whole Business Review Committee (BRC) process is aimed at an interaction between the company management and the principal shareholder to focus on issues and concerns and one of the significant concerns is to improve the performance of companies.

CN: How is non-performance being addressed?

IH: Where there is non-performance, action is taken.

CN: Study findings have shown that companies with revenue models like Ford in the US have shown considerable increase in their profit margins. Is the Tata Group also planning to set up such a model to give a fillip to its profits?

IH: Yes, we are developing more and newer metrics to measure performance and through the BRC process we are asking companies to define their strategies and to quantify shareholder return over the next three to five years. The most important outcome of this exercise is that companies are now taking a serious look at their lines of business to find out whether they are creating or destroying value for the company. I think the whole BRC process is driving companies to put shareholder value at the top of their agenda.

CN: One last question: At a time when the consumer market is booming, what steps do you plan to take, as chairman of Voltas, to regain the company'slost glory?

IH: Well, we have managed to arrest the loss of marketshare in the air-conditioning business. The management of Voltas has clearly taken up the challenge to regain its preeminent position in the air-conditioning business. The main thrust area for achieving this is to improve the service image of Voltas. The production facilities have been considerably upgraded and in terms of performance and capability, it is second to none.

A big problem the company faces is the major brand building that is being done by the Koreans and Voltas has to find a way of meeting this challenge. We have a very well entrenched brand which can be revived by partly increasing the advertisement spend and substantially by offering better service to the customer.

The company has also taken some web-related initiatives to promote its brands. The name of the game right now is to improve the distribution system. Service, distribution and branding are the three elements to success. Branding is a question of money, the other two are a matter of attitude.