'I have a dream of Tatas being managed by younger people'
Business World — December, 2000

This is the transcript of an interview given by Group chairman Ratan Tata to Tony Joseph and Radhika Dhawan of Business World in December 2000

BW: The Tatas have decided to go in for evolutionary change rather than revolutionary change. Do companies have the luxury of this slow pace of change in this time of rapid developments?

RT: We in the Group Executive Office coined this term evolutionary change because in some ways we suffer from this tremendous dilemma brought on us by our various companies. Change is seen to be needed and needed fast so long as it does not affect me. If it affects someone else fine, we want to see the change but if you suddenly tell me that I am the company that has to go, or has to be cut in half, or three of my businesses have to be hived off, then all of a sudden, the very person who made the noise is now saying, you don’t have to do this.

And we as the GEO have faced those kinds of resistances coupled with many cries of demoralisation and so on, and so we have ourselves been looking at this cautiously in terms of going through the process of the Business Review Committee, trying to work with those managements and make them fall in line with the focus that we wanted to give and assuring them that it is not that they wake up one morning and find that they are not a part of this group.

Now I take a view that most groups, and certainly in this time, do not have the luxury of taking their own sweet time about it, but before you start this exercise you need to go through the creation of a ‘comfort zone’, of letting everybody feel that this hundred-years-plus group hasn’t decided from the next day to undertake a change in which ten companies are taken out or some such thing has happened. Those of you who have been around know the trauma that we went through when we rid ourselves of Tomco.

BW: You have now been the chairman of the group for almost ten years. What, in your view, are the most significant changes that you have brought about and, therefore, what are the priorities ahead?

RT: In the last ten years the group has moved with a greater focus to some of the new economy areas that we did not have earlier. It has increased its activities in the IT area, in Telecom. We will leave the car business out of it -- which I consider an achievement but my critics and business rivals may have a different point of view.

The other thing that has been a very uphill task, and probably from the outside is not as visible as from the inside, is the fact that that this group is not a group. Earlier, it moved in different directions and a great deal of effort has been made to create some commonality and uniformity in its thinking so that the group can stand together more than it has in the past, while at the same time protecting the autonomy of the companies and their businesses. As examples, I could refer to some controversial issues like the retirement policy, or some of the HR policies, or remuneration packages, or movement within the group from one company to another. These are not things that we have solved as yet but something that we have started – a common brand, fund a commonality that makes us feel like a group.

Those that want to say that the group has gone through difficult times must consider that that is a function very much of the economic scene also. Just a couple of years ago, those same people had a different view on the group and there again I think history will have to look back and take a view.

BW: Some two years ago the structure was put in place to facilitate the change process with the creation of the GEO and the BRCs, etc. In the course of researching our article we have been told that there has been a certain degree of resistance and awkwardness in accepting the structure. Has this whole structure worked according to your expectations and are you proposing to make any changes?

RT: I think the structure has worked. Many companies and CEOs have commented that this exercise has forced some of our companies to look at their long-term strategies. Many of them did not have any long-term strategies. Some of them will admit that they didn’t, some of them will claim that they had. But the most important issue is that we really have come to grapple with what the company is going to do in the future, how globally competitive it really is or can be and from that will evolve a view as to whether the company in our view, in the view of the GEO, would or should be a part of this group, or merged with another company, or should be a candidate for sale.

BW: Doesn’t this raise the question of ownership of change? Here you have a situation of a group of outsiders telling this company that they should do this or do that. Why should they do it?

RT: I will tell you why should they do it. What is the GEO? The GEO is just the representative of the major shareholders and so it is not a bunch of outsiders. The GEO is in fact a part and parcel of the executive committees of those boards. It’s just that the CEOs have often never had anybody to question them. So, yes, in certain cases there will be resistance. And you will probably find the resistance more from those companies that have not been doing well.

BW: If you take an overall look, on two things the group has made fair progress: in acquiring greater cohesion and in reshuffling its business portfolio.

RT: In my view, it has not made sufficient progress in cleaning out our portfolio, it has not made the kind of progress we would like to make. Initially, like I said, this would take a lot of time and then you will see a lot more happen.

BW: But from the point of view of the shareholder, there can be little doubt that the shareholder’s returns have not yet improved.

RT: That’s quite true but it’s not fair to say, for instance, that India is where it is because of the reforms or that the shareholder value loss is because of the GEO or restructuring. If you just take a company like TELCO (Tata Engineering), for instance -- and I am not denying that TELCO is going through very difficult times -- and if you look at who the major sellers of huge chunks of shares are, you will be surprised to find that it is UTI (Unit Trust of India), which has sold huge chunks of shares in the last year or year and a half that could do nothing but drop TELCO’s price. I thought it was the FIIs (foreign institutional investors), which were selling the shares, but it’s not -- it’s the UTI.

I was shocked and surprised. I can understand that somebody would want to shift their portfolio by a gradual changeover and invest in IT but if you unload huge amounts in one single time then I don’t understand it because it would hurt them too. So all I am trying to say that not all loss of shareholder value is caused by open market perception.

BW: If you look at indicators like ROIC (return on investment capital) or the profit margins there has been a steep decline in the group since 1995-96, which has been seen as the best year for the group. Is this serious and what can be done about it?

RT: I am not going to defend this but have you looked at the drop in the stocks in the IT area over the last year? You will find that it has been more than in the brick and mortar stocks. As for the group, what has happened is that the basic industries have gone through a horrible, horrible decline. Tata Steel has been an exception of bucking this trend very significantly but the other companies have, in fact, been severely affected. Having said that, it has to be conceded that not everything is an external issue; there may well be internal issues too but certainly it has not been that we have been declining in a market that has been growing.

BW: But you have been increasingly impatient on this score, haven’t you?

RT: Any chairman is going to be dissatisfied with his people in a downturn but I don’t think that is an issue of being impatient. I am telling you that there are many things that are internal to the companies but it’s not as if we are losing shares and margin in a market that is going the other way.

BW: Is the issue that companies are not delivering because they are not necessarily doing what the group wants them to do? For instance, Titan. It has gone into the jewellery business but, we understand, the group did not want that. Or take Tata Chemicals, perhaps the most mismanaged company: should the group have waited so long before it replaced the managing director?

RT: It’s always easy to make comments in hindsight. In all cases, you are dealing with people and it is easy to react in a knee jerk manner in one thing but it is perhaps best that you make changes when you have solutions. Very often we have found ourselves in a situation where there is a dearth of available people at the top internally because there have not been changes, there has not been mobility because there has been a basic resistance to inducting people from the outside because the group has tended not to do that.

So, when one has a situation where a company is doing badly you have the responsibility of ensuring that what you do will contribute to a turnaround and not take a company from the frying pan to the fire. You have that responsibility also and you try to work with the people to have some things change. And then when you see you don’t succeed, you make a change. In hindsight, you can say this should have been done six months before or a year before or whatever and it is always easy to do that when you are not carrying that responsibility. When you are, you need to ensure that your decision is not the wrong one. I am not referring to Tata Chemicals per se, but, regrettably, when you are doing some restructuring, there are always some elements among the "targetted groups" who are always saying that you are not doing the right thing.

You referred to the case of Titan going into the jewellery business and the GEO’s contrary view on this. Ideally, where is this kind of issue to be discussed and debated? At the boards of these companies. Today, one of the weaknesses of the whole structure is that the boards of the companies have to be more concerned with the businesses of their companies than they have been. The BRC (Business Review Committee) is a catalyst to bring to the surface what they think is necessary. Let’s take your example: Is the BRC that should make this determination? Should the BRC be raising this question? It’s the board that should raise this question because that is where the requisite authority is, that is where the CEO takes his directions from. The BRC has been a catalyst and a point of focus for the concern of the shareholders but finally its view has to be passed on to the boards. The BRC has not been passing any orders. The BRC has been giving its views to the board.

BW: My question was in the context of time. We are waiting for a process to be gone through when in many cases it is clear that there is a management failure.

RT: One of the questions that has come up in the context of the structure that the Tatas have is: who really has the mandate to change the management? There is only one company that actually has put on paper that it is the Tatas who have the right to appoint the chairman or the MD. In all the other companies, it is a kind of a vague area.

BW: Is it something that you have asked for?

RT: No, but it is something that should be there. Today, in fairness, the major shareholder, if it were to be transparent and pass the test of governance, can only do this through the board where it has its representatives. There is no right to remove or the right to appoint -- it is not written in anywhere. So, tomorrow, if someone chooses to question Tatas removing X or Y from a company that bears its name but where it has a 20 per cent stake and maybe has two representatives on the board, someone may question what right do the Tatas have to do that, just as someone may question why it didn’t try to do that earlier.

All I am trying to say is that from the outside, it is easy to take that view, and with some justification, but there are some real problems inside which we have to resolve.

BW: Under the J.R.D arrangement, each company was run by satraps but there was also a strong element of entrepreneurship. You have removed many of these satrapies but you haven’t put in strong enough incentives in those companies for people to regard them as their companies from the entrepreneurial point of view.

RT: What have I removed that has taken away the strong entrepreneurial spirit?

BW: You have told them that these are not your companies.

RT: But they were not their companies even earlier.

BW: Yes, but they were allowed to behave like they were.

RT: We are talking of incentives, right. In fact, most of our companies have gone to their shareholders with enabling resolutions for stock options. But recently there has been a view in the group which warrants attention and which has slowed down our view on stock options. This is to look at EVA (economic value added) related incentives which are not stock options, which we are in the process of looking at before we decide either in favour of stock options or these. So, most of our companies will have one or the other before this (financial) year is out most probably.

BW: Is this an issue that you see: that while systems and processes are embedded to ensure that the group companies conduct their business ethically and professionally, there is a need to impart more of an entrepreneurial spirit.

RT: Again, I hate to say this, because this is again an issue of looking in from the outside. There are some very fundamental lapses in companies which often do not have good employee evaluation systems in place. You forget the stock options which may be with a few. You need to worry if down the line you don’t have good evaluation systems or don’t practice good evaluation systems, to give merit where its due, to weed out the deadwood, to actually set out the tasks for its employees. And if there is one area where I could say that the GEO has not acted fast enough, it is in fact to revamp the HR policies, to bring them up to levels where there is recognition and reward for good performance but, above all, measurement of performance. In fairness, stock options look fine and they are fine if you want to attract talent but finally you have to give incentives on the basis of performance and to do that you must be able to measure that performance in a truly objective manner which means there must be a framework to do that.

BW: Tisco (Tata Steel) is generally regarded as a star performer. What was it in Tisco that distinguished it? I hope you agree that Tisco has been a star.

RT: Yes, Tisco has done a terrific job. Much of the credit for this should go to Dr. Irani and his top team for driving change in a very committed way. I think many of the other companies have not shared in that commitment. One of the things that they have done is to take very seriously the Tata Business Excellence Model, which developed out of the GEO exercise.

But apart from everything else, Tata Steel has really gone after reducing its process costs and, of course, being in a commodity business they have been able to maximise production and drop prices through the bad times -- you can’t do that in a product company like TELCO. And now that the market for commodities is building back -- both here and abroad -- they have been able to capitalise on those gains. But I think the main driver in Tisco has been the tremendous commitment that the top team had to meeting the objectives that were set.

BW: Could you please clarify the status of the small car project on the issue of alliances, sell-off, whatever?

RT: First of all, let me say there are no negotiations under way to sell, to form joint ventures or anything of that sort. One has been talking to several companies about the possibilities of alliances, as I have said many times, of swapping of products, of leveraging our Indica platform for the sale of small car activity in other markets, of enhancing our product range by being able to badge products from another company or engines or drive trains. There has not been any discussion on divestment; there has not been any discussion on a joint venture as yet.

BW: There is a feeling in TELCO of being neglected, with no fresh investments being made. What is the future you see of TELCO ?

RT: I see a terrific future for TELCO. We are in a downturn today but anybody who makes the statement that we have lost interest is ignoring the Rs.1,700 crore investment in the car project, which only the media is banging us on. To people up or down in TELCO, that investment should be an indication quite to the contrary.

BW: The Indica has not sold as per expectations: of selling 150,000 cars in a market of a million cars. Has that been a disappointment and what has gone wrong?

RT: Of course there is disappointment but the car market has flattened out and there are many more players than we saw at the time when we were developing the car and talked of those quantities. Today there is an overcrowding at that end of the market but when we talked of our product, which we did from scratch, there was no one at that end except Maruti. And I had said, then, that the only ones who can enter the market at that price end are the Koreans and today no one is doing an investigation into how much cross-subsidising is being done in the Indian market of their products.

BW: One of them is saying it is breaking even.

RT: Sure, they may be breaking even in India but at what prices are their kits coming in?

BW: The group has been talking about increasing the value of the services business as against the assets-based businesses. How much has been done in this regard?

RT: We have been giving emphasis in the services area, in finance and so on, and you may find significant growth in that area but if you were to look at the percentages in a group that is still fundamentally weighted towards the assets-based businesses, it would still be small for several years.

BW: The last time we spoke, we spoke about the need to make TCS move up the value chain. How far has that been done?

RT: In some areas, that has been done but one of the problems with TCS has been that they have some fairly large contracts, that are long term, at prices that have only a certain level of escalation as against all new contracts. I think in terms of TCS actually moving up the value chain, it has been very significant but it has been outside that contract area.

BW: There is an assessment that, compared to its competitors, there are some structural issues that prevent TCS from deepening its expertise in areas.

RT: I don’t think so but I don’t know enough about other companies to comment.

BW: What about some of the other companies in the group -- the Infotechs and the Forbes and the Voltases -- which are seen as laggards in the restructuring area. What is the GEO doing to hasten the process?

RT: Who is initiating the cleaning up? That is the part I have been talking about -- that we have been the catalysts, asking questions. Forbes is a good case because Forbes is like a group itself, made up of various tiny businesses. A lot of work has been done which is not seen from the outside and there is sometimes resistance or disinterest on the part of board members to force something through.

BW: Is there any particular reason why the Tata Electric Companies took so long to get an MD? I ask this in the context of having been told that it wasn’t a question of attracting talent because TEC had attracted resumes from the best in the business.

RT: I don’t know that the TECs got some great resumes for the MD's job. I sat on that committee for some time, I wasn’t the chairman then, and I don’t think that the profile of the MD that the company was looking for would have been the best thing for the TECs. The resumes that were considered were most often from the State Electricity Boards because people were looking for power people.

BW: There’s been endless talk about TCS going public. Why isn’t it happening? Would it be correct to say that the reasons why it is not going public is because without it the position of the chairman of Tata Sons would lose its power in terms of the financial clout? That it is not really a business decision not to take it public.

RT: It may be a business decision; it may not be the decision you think is fair. In fairness, if you were an investment banker you would think that taking TCS public is a terrific deal. You have a public offering, you so-called unlock value and you dilute your equity. But another way of looking at it is to ask if you are generating enough revenue to grow at the rate that you want. TCS has grown to the size it has while being a private company, it hasn’t being devoid of funds it may need to grow. To a great extent it’s growth is restrained by human resources than by its cash needs. And while I don’t understand what you mean by the issue of power, yes it is true that if TCS were to go out of Tata Sons, its cash flows would be substituted by a large chunk of money.

BW: But what business reasons can there be not to take TCS public ?

RT: There may be tax issues. I don’t know if you are aware that if you make capital gains profit on 10 per cent of TCS, the tax that you will have to pay will be calculated on the basis of the capital gains on the entire equity of TCS. If I create a subsidiary, then the capital gains cascades to the whole company even though you have not actually gained value on the whole company. If you look at that, then it in effect wipes out all the gains in that. There are no issues on not taking TCS public but equally you ought not to take it public because that’s the way the wind is blowing.

BW: Let me put this differently, even if you find this somewhat irritating. Would you say that the Tata Sons chairman will have the same power in holding the group together if TCS were not in it?

RT: It is irritating me because what power does TCS bring that is holding the group together? What money does TCS bring that is helping hold the group together in terms of money power? Yes, TCS is providing a cash flow which many of the companies are unable to provide but what power does it provide? TCS has always been there, it is something that was created by Tata Sons; it isn’t something that somebody gave us by accident, that we’re dwelling on. We grew the business so why are we being accused of holding on to it for the sake of power? When the management agency system lapsed, we created this consultancy service, we grew this business to be the largest software consultancy in the land.

The hold that the chairman of Tata Sons has in Tata companies comes from the holding in those companies. You may say that the holdings partly came from TCS earnings but TCS is a part of Tata Sons; it was created in the 1960s but it has come into prominence now because it has become a fashionable issue. Would you have told us, say in the '70s, to take it public?

It has become a big thing today, which is fine, but we also have to concern us with whether 10 per cent of TCS is too much for the Indian market. So there are a host of reasons which we have to contend with but the reason you ascribe for us not taking it public is not fair. I think the issue is: do we feel that we are standing in the way of the growth of TCS? I think the only issue that is valid is that if TCS is not a company in its own right we have to find a way of providing those employee incentives that it would otherwise have and that’s something that we are addressing seriously. And in all fairness this is an issue that is there for the people who are there compared to being in those companies which have stock options.

BW: If we take a long term view, and considering the plans that you have in broadband and airlines and internet services, how would the Tata Group of the future be different from what it is today? How much of this is a gleam in your eye and how much of it is on the ground?

RT: There is no gleam in my eye except that I would not like it to be a group of 80-90 companies in 30-40 businesses, with some of them being very small. We would like to continue to be focussed on trying to be a group of companies in fewer and more focussed businesses in which we can focus our attention so as to be more visible in the marketplace in terms of their size. Yes, I have a dream of Tatas being managed by younger people, with greater empowerment than there is now. I think that one dream if it comes to pass will change the complexion of the Tata Group in the next decade. We will shed some of our traditions, some of our inhibitions to change and be a group that is much more nimble-footed and willing to move with the times.

BW: Have you looked at companies which can tell you what you need to do make this happen?

RT: I don’t think you need to look at other companies. In the group it’s quite startling if you look at our core companies and if you look at the age of their CEOs and then you look at our joint venture companies and you look at the age of their CEOs. What I would like to see is that all our companies would have CEOs of that age and that we have mobility within our companies. Yes it’s far easier to do this in younger companies and newer companies but we need to be moving in that direction for the whole group. In the past CEOs became CEOs at the age of 60 or close to that but we need to start to move that down. We may not have a 35-year-old in that position initially but I think we need to empower younger people down the line and see them take more responsibility. I think that would be my only dream; the rest would be just working at restructuring the companies.

BW: On the airline issue, I don’t know if you saw this press report about the previous civil aviation minister Ananth Kumar being upset at missing a Jet Airways flight and saying that this was not what he expected considering what all he did for that airline when he was the minister.

RT: I would not like to comment on that. All that is history and there are many who contributed to the situation which led to the withdrawal of our proposal for a domestic airline. All that I would like to say on that issue is if the government adopts a policy it should not allow vested interests to subvert that policy.

Similarly, if you make a policy on Air India divestment, and you say that 26 per cent equity dilution is allowed for a foreign airline, then there should not be subversive forces within the country that will say that it should be 100 per cent Indian. We should then make a policy that should say it should be 100 per cent Indian.

I don’t see why once a policy has been adopted it needs to be debated in Parliament: by all means debate a policy threadbare before it is adopted but what is the purpose in debating the policy after it has been announced? That way you can never get anything done. So if you have decided, and Parliament has decided, to disinvest X or disinvest Y and set up certain terms, debate that and then declare it or don’t declare it. After you have solicited enquiries, raised bids, and the whole world is watching you, then I don’t think it is right on anybody’s part to debate that and subvert that. Then no government can gain credibility in that form.

BW: Airlines is a difficult business to get into: not many airlines make money in a deregulated environment. Isn’t that so?

RT: Some airlines make money, some don’t. I think like anything else it’s a combination of factors. It’s a business like many other competitive businesses in which if you don’t sit on top of it and you allow it to move down then it is very difficult to catch up. And I think in Air India that has taken place: it has been allowed to slide down and it is not the fault necessarily of the management that this has happened.

BW: The change process in the group has roughly been on for about two years. Is the group today roughly where you would have liked it to be? Do you have a time frame and a cut-off point?

RT: No, there will not, and there should not be, a cut-off point on restructuring. This will be a continuous exercise which will go on.

BW: What kind of targets have you set for yourself? What did you want to achieve?

RT: What I wanted to achieve did not count on the economic scene being the (depressed) way it has been over the last few years, otherwise we would have gone very differently from where we are now. I have to concede there has been a lot of internal firefighting to do on company turf as against group turf, which has come in the way of undertaking strategies to counter what we have on the ground. I think what we have done in terms of a group task is to set out the kind of turnover and profits growth we want. The issue of portfolio restructuring, which the BRCs was supposed to do, has gone on for a much longer period because we found that companies did not have long-term strategies and we had to help companies put their strategies in place.

Now all the 13 companies which have BRCs have gone through that, we have communicated where restructuring or change or definition or redefinition of business has to take place and the companies are addressing them in one form or another at the board level.

If you ask does that go on endlessly, no it does not. The steps we will have to take will emerge. We are not in an environment where, for arguments sake, if we decide that a company needs to be sold, that we just turn the switch and we sell it. You need to go through that process in a manner that looks after the interests of its stakeholders. And whenever we have chosen to do it, we have chosen the moment and we have done it. For example, the ACC sale.

So, what I am saying is that we will take the route we wish to but we don’t have to announce it beforehand that that is what we are wishing to do. All this cannot happen at one time. There will be times when something will take place and that will happen because all the pieces have fallen in place. You might argue why it didn’t take place earlier but those external pieces may not have been in place earlier.

BW: You made a mention of the economic slowdown. There are those who believe that there is a crisis of confidence in the country about the manufacturing sector per se. Would you agree?

RT: Not really, it’s not that there is a crisis of confidence about the manufacturing sector, it is the manufacturing sector which is facing the problem. Earlier you had three years of very high growth, a lot of new capacity was created because there was a pretty significant demand growth. Every time I questioned this and said it couldn’t be sustained, people questioned that but finally the ducks have come home and you find that you have a flattening or a downturn.

So investments have taken place in manufacturing but demand has fallen for a variety of reasons. One is that the cost base has been higher, the second has been that growth in agriculture has been uneven. Also there has been a fair amount of opening up of India, with many foreign brands also coming in, which I think is a good thing. But what that has done is to create many more products for that same demand profile. So those who are in manufacturing as against those who are in trading find that they are having a great problem in being competitive.

BW: If the Indica were not there, would what TELCO has been able to do, in terms of cost cutting and business reengineering, have been far more obvious?

RT: No, because while Indica sales at least have been growing, the investment in truck manufacturing has seen a lot of idle capacity because the truck market has actually shrunk.

BW: Could you please comment on this whole issue of succession? There’s quite some confusion about what’s to happen and, I understand, quite a bit of consternation in the group.

RT: What I said somewhat transparently and innocently in the Karan Thapar interview which set off all these "explosions" is that we have a retirement policy where we need to step down from executive capacity at 65 and this will apply to me too. It is my task to put in place a succession where I have an executive role, to find that successor and to put him in place during that time.

BW: The media sees your attaining 65 two years from now as marking some kind of a watershed, as far as the group chairmanship is concerned. You have to correct me if I am wrong, but this impression is somewhat exaggerated, because I don’t see anything changing. There may be an executive head for TELCO to replace you but nothing stops you from continuing as chairman of TELCO. Tata Sons does not have a MD today; it may have one seven years down the line. So there is not a major event that is going to take place?

RT: Yes, that’s right. What I said innocently and openly on that programme was that at 65 I would retire from the executive positions that I hold.

BW: So you could well be heading the group for the next seven years? Will you then step down as the executive chairman and be a non-executive chairman and there will be a GEO and life will carry on as usual? Or will somebody be appointed in your executive positions?

RT: Yes, there will be somebody appointed to the executive positions that I hold. In those companies where I am chairman I will continue and in some cases I might choose to step down from that position.

BW: So the succession that you are looking at is really another seven years ahead?

RT: Yes, to find somebody for Tata Sons who will in fact be the group chairman.

BW: So there is no impending urgency for you today to look at a group chairman?

RT: There is an urgency because I would not want the situation that took place in my case where there was continued speculation about who would be the chairman for Tata Sons until one day it was announced. I would like my successor to have two or three years, at least two years, with everyone knowing that he is my successor, and then take over.

BW: Among the Tata companies, you get a sense that Tisco and TELCO are getting in shape but the companies that seem to be on the aggressive growth path, or more focused direction, are Tata Tea and Indian Hotels with their acquisitions. Would you agree?

RT: No, not necessarily. What you are saying is obvious because if Tata Tea acquired Tetley or if Indian Hotels acquired some property in India or abroad then it would seem as a form of aggression or a direction. But I think in fairness, would you consider it prudent if Tata Steel were to acquire an existing steel company which is already struggling?

BW: More than the acquisition, the point being made is that companies must focus on growth? For instance, where will Tata Steel’s growth come from?

RT: Everybody has been knocking Tata Steel and TELCO in particular. Let’s keep TELCO out of this, but if you take Tata Steel, it will probably have its best ever year (this year) in a market that is going the other way and it will add enormous value addition to its product mix with its cold rolling mill. And the company will have grown marginally but grown in its own area in terms of tonnage through process improvement and rationalisation—and all at relatively little extra cost. It will have secured itself in its raw material area for the next 15 to 20 years. And its task is to be one of the lowest cost steel producer in the world and if it achieves that I would say that that is as much a mark of performance as someone who grows to three times its size in tonnage by acquisition or brownfield expansion or whatever. I think what Tata Steel has done is truly remarkable in this period. And yet it is being knocked in the stock market because steel is not the flavour of the month.

So all I would say is that Tata Tea and Indian Hotels will need to grow in terms of acquisitions and acquiring more properties because the market in those areas is growing. TELCO went into passenger cars because it felt that the market for trucks was getting saturated and it needed something that was in a somewhat different business cycle. But I don’t know what a company like TELCO could have done when you say it does not show the same type of aggression. Could it have acquired Leyland? Could it have acquired Allwyn Nissan or Eicher? That kind of consolidation is happening abroad. What would Titan do? Acquire Allwyn watches? I am asking all this even though I too think that today there is less and less of a reason to start a new business on a clean sheet of paper in any business: acquisitions seem to be a quicker way to grow. Yes, Tata Tea did make a very bold and a very far-sighted move to acquire a global brand and I think it did this very boldly.

BW: Does the high-risk element in the Tetley deal concern you greatly?

RT: Yes, it is a high-risk deal but I am confident it will go through, even though it may have its ups and downs. Most importantly, it gives an Indian company access to a foreign brand on which it can build. I think we have been very lucky that the operational management of Tetley has chosen to stay on in the company. If we had had to graft our culture into the company that would have been a tremendous task. We may not have had the people with the experience of dealing in that environment. The fact that it is the same management team that had managed the turnaround the company and that it has stayed on is a great plus.