Ratan Tata rebuilds an Indian behemoth
Financial Times — August 11, 2000

In the nine years since his appointment Mr. Tata has occupied himself with the mammoth task of restructuring and paring down the Indian behemoth. It has at times been a long and lonely process.

Go anywhere in India and you cannot fail to see the word Tata everywhere, on trucks, cars, electrical goods and even tea. This is not surprising considering the Tata group is one of India's largest business houses. Last year the group's turnover reached $8.3bn.

Earlier this year the company launched itself into the international spotlight with its 271 million pound takeover of Tetley Tea, the UK beverages group. The deal - the largest overseas acquisition undertaken by an Indian company - gave Tata a much-needed global brand and also showed the international ambitions of Ratan Tata, the chairman of the Tata group.

For almost a decade Mr. Tata has sat atop the Indian conglomerate, which operates in 25 countries and exports to more than 100. His appointment in 1991 coincided with the opening up of the Indian economy to foreign investors and the liberalisation of domestic business rules. On one hand, Indian companies had more freedom, but on the other, they were vulnerable to competition. This included the Tata group, which consisted of over 300 companies in 40 different business sectors.

In the nine years since his appointment Mr. Tata has occupied himself with the mammoth task of restructuring and paring down the Indian behemoth. It has at times been a long and lonely process, and he has ruffled more than a few feathers of the companies' executives hostile to any interference. Today, he says, the group has 'conceptually' achieved perhaps 70 percent of the needed structuring. Tata now includes 82 core companies, over a quarter of which are listed, including its flagship business such as Telco the car and truck maker, Tata Steel, Tata Chemicals, Tata hotels business and Tata tea.

Actual implementation of the restructuring lags behind at only 20 percent, but many see this as a major achievement for a group which many company doctors would have given up on years ago.

One of its biggest barriers the former architect is facing in rebuilding his company is resistance to change, along with an innate aversion to risk within the group. "We don't need to be flamboyant or cavalier, but we do need to be less conservative that we have been," he says.

But one trace of the past still remains - the provision of free housing and transport for almost all of Tata industries' 260,000 workers. It is not only a residue of humanistic principles the company was built on over 120 years ago, but a necessity. At present, says Mr. Tata, "there is no way an Indian employee can afford his own housing". So acute is the housing situation in India, even Mr. Tata despite his executive salary, cannot afford a property of his own and instead lives like any other employee in the company accommodation.

A distant relative to the famous Tata dynasty founded by Jamsetji Tata, Mr. Tata was hand picked for succession by then J.R.D. Tata, because of his vision for the company.

Alongside consolidation, this vision has included investment away from the groups core industries of steel, power and trucks, into new economy disciplines such as financial services, mobile telecommunications and software.

In March the group announced a joint venture with Aditya Birla, India's second largest business house, and AT&T, to merge their cellular business in a deal that covers nearly 25 percent of national telecom subscribers. With one of the largest middle classes in the world, India is poised for an explosion in mobile communications.

The group was also one of the first Indian companies to invest in the information technology sector which now employs almost 20,000 computer specialists.

Born in Bombay, Mr. Tata left his homeland at age 15, to study in the US. He eventually graduated in architecture from Cornell University. He spent a few years practicing in the US before returning to India, where he joined the Tata engineering and steel companies in Jamshedpur.

Mr. Tata moved his way through the group's various companies, including Telco, the groups truck and car division. In the mid-1980s he was given charge of the Tata industries, a holding company responsible for taking the group in to new industries and forming joint ventures. In 1991 he was made chairman of Tata. Famous for his love for flying, Mr. Tata, who regularly pilots jets but prefers helicopters because, "they are slower and lower and therefore more fun to fly", is tipped to make a bid for Air India when the state run airline comes on the market later this year.

When asked about a bid his response is opaque. "We haven't ruled out bidding for Air India," he says, quickly adding: "We haven't taken any decision to do so in the first place either."

But if a deal is on the horizon, the former Air India chairman wisely has no plans to fly solo. "Even if we were to be involved we would necessarily want to choose an international airline to partner with," he says, admitting that Singapore Airlines would be his favoured partner.