For Ratan Naval Tata, 63, March 25, 2001 was just like any other day. At 9.30 or so he walked into his fourth-floor office in the imposing Bombay House on south Mumbai’s Homi Mody Street. He flipped through the pile of papers secretary Ramaswamy had placed on his table before taking stock of immediate issues with his senior lieutenants. Then flitting in and out of meetings, the chief of India’s largest private group worked his way through another routine workday. None of his managers remembered that their chief had completed ten years at the helm of this Rs 40,000-crore ($ 8.5 billion) group. "It wasn’t a big event for us. There was no mention of it at the boardroom lunch table," said a senior Tata manager.

The lack of celebration must have been deliberate. Unlike the powerful satraps that ran key companies under his legendary predecessor J R D, Ratan Tata is low profile almost to the point of reclusiveness.

But there are other reasons that Tata may not have wanted to fete his first decade in charge. Economic liberalisation, which started just months after he took charge, made the nineties one of the most turbulent for Indian business. And the paternalistic heavy engineering-to-services conglomerate, whose flagships had thrived in heavily protected markets, did not escape the ravages of the heightened competition in a globalising India

This is no surprise. It was an unwieldy empire that he inherited, and licking it into shape has not been an easy task. Recently, Tata himself described his empire, in which holding company Tata Sons Ltd (TSL) has a 26 per cent stake in most of the listed companies, as an aggregation of different companies, each one in the footprints of its leader, different and individualistic.

With 37 businesses and an official list of 84 companies (a group insider put the total at 300), Tata employs around 2,30,000 people, big enough to give even the largest public sector undertaking an inferiority complex.

Ratan Tata was no spring chicken when he took charge, but little in his previous experience could have prepared him for the challenge that was handed to him when JRD stepped aside.

Most reports on Tata’s efforts to mould the group have focused on a few key issues. First, there was the business of taking charge after seeing group stalwarts retire: S Moolgaokar in Tata Engineering, Russi Mody in Tata Steel, Darbari Seth at Tata Chemicals, A H Tobaccowala at Voltas and Ajit Kerkar at Indian Hotels. Sometimes, there was a messy fight with the outgoing chief executives, most of whom were in their 70s but reluctant to hand over charge or develop a succession. The attendant unwanted headlines didn’t make the task any less unpleasant

After taking control, there was the business of making control secure from raiders. Traditionally, the group had tiny holdings in its operating companies; more than anything else, it was JRD Tata’s personality that had held the group together. At one point the Birlas had a larger shareholding in Tata Steel than Tata Sons did.

But Ratan Tata saw the advent of a takeover market for companies, recognised the latent threat, and has worked assiduously at securing group control. In most companies today, group holding is now at least 26 per cent and headed higher.

Third, there was the often unpleasant task of getting rid of businesses that no longer fitted into the corporate vision, or which could not yield adequate returns. So, out went ACC, Tomco, Lakme, Goodlass Nerolac, and Merind. The group has also pulled out of a slew of joint ventures with IBM, Mercedes Benz, Timex, Timken, Lucent and PepsiCo.

Against this, the only significant acquisition has been an overseas one: Tetley Tea, which is a good fit with Tata Tea. And the only significant diversification has been into telecom services. The group that has emerged under Ratan Tata, therefore, is a more focused business house, though still highly diversified.

Fourth, there was the critical task of strengthening the group’s human resource base. The achievements here have been patchy, because while R.Gopalakrishnan from Hindustan Lever and Kishor Chaukar from ICICI have been critical inductees at the top, several companies still need key leadership positions filled. Tata Engineering has no full-time chief executive, and the heads of Titan, Indian Hotels and Voltas are due to retire in the near future, under Tata’s new retirement policy.

Tata himself has to find a successor as group chief executive in two years, when he turns 65, after which he is due to become non-executive chairman.

Finally, there was the business of developing a more clear-cut and properly defined group identity. This has been attempted through the development of a new Tata emblem and brand identity, the strengthening of focused action through the creation of a group executive office (GEO), inculcating a formal group accountability ethos for chief executives by having business review meetings with the GEO, and encouraging excellence through the Tata business excellence model (which brings with it the Malcolm Baldridge award).

All of this has made for an almost text-book approach to the challenge that Ratan Tata confronted when he took charge. So how do you measure the results of a process imbued with so many qualitative characteristics? In cold financial terms, the results are not impressive. A study by Business Standard’s Research Bureau of the group’s ten leading companies over Ratan Tata’s ten-year leadership suggests that his report card wouldn’t have too many ‘A’s. (These companies account for 85 per cent of group revenues and 90 per cent of the profits.)

The first ‘D’ he would earn is the performance of his key companies on the bourses. Unchallenged blue-chips in the eighties, fully half the top 10 now have market capitalisations that are lower than their 1991 levels. In an age in which shareholder value has become a litmus test, the BS Research Bureau’s Tata Index grew at a compound annual growth rate (CAGR) of just 3.5 per cent a year. In comparison, the Sensex appreciated at a CAGR of 22.85 per cent, while the average rate of wholesale price inflation was 7.7 per cent.

It’s not that the group hasn’t grown. In fact, during the last ten years, investment in the Big Ten increased by a hefty Rs 25,263 crore to touch Rs 31,869 crore in 1999-2000 (a CAGR of 19.1 per cent). But plagued by demand recession, the huge investment appears to have failed to bolster the group’s fortunes in steel, cement, automobiles, chemicals and fertilisers.

This has meant that the Return on Capital Employed (ROCE) fell from 16.94 per cent in 1990-91 to 10.75 per cent in 1999-2000. Return on net worth dropped even more dramatically, from 16.19 per cent to 8.57 per cent in the same period. The return on equity capital does not match the average rate of interest (ie the return on debt) during this period, and this is failure on a critical test.

Can this be explained by the challenges of a changing business environment? Perhaps. In the ten-year sweep, the top ten companies showed double-digit growth in sales and profits, which is pretty much in line with the next five biggest groups (see page 3). Sales of the top 10 group companies increased at a CAGR of 14.21 per cent, with the peak growth year being 1995-96 (22.73 per cent). But profit margins have been under pressure. The CAGR for profit after tax (PAT) for these 10 companies ruled at 11.9 per cent.

So what are the real success stories? If Tata deserves an ‘A’ it is for Tata Steel, which has been the turnaround story under his hand-picked lieutenant Jamshed Irani. Successive years of modernisation, quality initiatives and radical job cuts has seen the company emerge as the world’s second lowest cost producer of primary steel. A sign of the scale of change can be had from its employee roster down from 78,000 a few years ago to 48,000 today.

But the millstone around Tata’s neck, and one which drags down all group figures, is Tata Engineering. Ups and downs in the truck market have meant periodic crises, as now. And the diversification into cars has been a triumph of enterprise but a dubious exercise in most analysts’ eyes because they don’t see a long-term future for Tata in cars. Analysts have criticised Tata for not hiving off the Indica car project.

Tata managers rally behind their boss when they say, "If Tata Engineering is not doing well, it is not because of the car project, which has a long gestation period. The drop in commercial vehicle sales is affecting our bottomline."

But the head of an automobile firm argued that Tata would have done better if the effort that has gone into cars had been focused on trucks. "They would not have faced the problem that they do today selling their trucks."

That Tata has personally led the company through the entire 10-year period has not improved his reputation as a chief executive. Said a former Tata manager: "He is a very good chairman, but a lousy chief executive."

The other point of criticism has been with regard to the group’s crown jewel, Tata Consultancy Services (TCS), which is India’s largest computer software business but operates as a division of the privately held group holding company, Tata Sons. That TCS is privately held has meant that the one business which could have improved group bottomlines, operating ratios and market capitalisation, has been excluded from public analysis. And the criticism is that Tata has failed to take the business public and do a stock market listing at a time when smaller software firms like Wipro and Infosys have been the darlings of the investing community.

Tata has offered a variety of reasons for keeping the business private, including tax problems in going public, but the real reason perhaps is that it is TCS profits (earned under the banner of Tata Sons) which has been used to shore up group holdings in the big operating companies.

Consider that TCS, with sales of over Rs 2,000 crore and net profit of Rs 640 crore, could command a mouth-watering valuation of Rs 30,000 crore and more, thereby quadrupling the value of the group’s top 10 businesses at one stroke! But with Tata saying that he wants to increase holdings in group companies to more than 50 per cent (from the present level of around 26 per cent), TCS will remain private for some time yet.

He also needs money to shore up the family’s holding in Tata Sons. Right now, Parsi charitable trusts control 65 per cent of Tata Sons, with the family holding a minuscule three per cent. The single largest shareholder is the ACC chairman, construction magnate Pallonji Shapoorji Mistry, father-in-law of Tata’s half brother Noel.

How would Tata assess his own record? Despite an undeniably energetic decade, he is said to be unhappy with the pace of change. In an interview to the Financial Times, Tata said with typical candour, "We have a long way to go in terms of consolidation and focus. I would say in conceptual terms, we are probably 60 to 70 per cent of the way, and 20 to 15 per cent in terms of implementation."

But time is beginning to run out. An immediate task is to find new people to head many of his companies. Already, two chieftains — Xerxes Desai of Titan and N Khurody of Voltas — will step down when they turn 65 later this year. R Krishna Kumar, managing director Indian Hotels, has three years to go.

At the same time, Tata has to see that each of his companies performs, including the laggards. And he is pitching for new businesses like aviation. Bidding for Air India with Singapore Airlines may be a matter of sentiment (it was a Tata company before it was nationalised) but insiders claim that he has a plan for transforming the national carrier.

So where does the group go from here? "They will grow only as much as the environment will let them," says a Tata manager. Quickening the pace is going to be Tata’s biggest challenge. Adds the head of a leading investment bank, "Nothing dramatic has happened in the group. In good times, they didn’t do anything great, and in bad times they appear to be all at sea."

That may sound like a tough judgement, but many shareholders in the big Tata companies would not disagree today, even if they withhold judgement about tomorrow.