The chairman of India’s largest business group — a 136-year-old concern that bears his family’s name — flew from the Seychelles, where he was inspecting a site for a new Taj hotel, to Mauritius, for the opening ceremony of another. 

Taj is India’s dominant hotel chain, and its expansion outside the subcontinent is part of a master plan to transform Tata from a venerable but staid institution into a serious player on the global stage. 

Ratan Tata’s plan is moving into high gear: in August he staged India’s biggest float, with the $11 billion (£5.7 billion) listing of Tata Consultancy Services (TCS), the country’s largest software-services company. A month later shares in Tata Motors, which makes cars and trucks, were listed in New York. 

There has also been a string of acquisitions to add to Britain’s Tetley Tea, bought four years ago in the biggest foreign deal ever made by an Indian company. Tata has recently bought Singapore’s only steel mill, Tyco’s cable business in America, and the truck-making business of Daewoo, the South Korean conglomerate. 

But relaxing in a beachfront villa hours before the hotel’s gala opening— the president of Mauritius was guest of honour —Ratan Tata explained that he had even bigger plans. 

Tata Sons, the holding company at the centre of the 80-odd Tata operating companies, is awash with cash after the TCS float. Ratan Tata said one option was to use funds to buy or grow another TCS-style company, and use it as a springboard to float Tata Sons itself. 

“We would list Tata Sons as an investment company. It would not be very different from Berkshire Hathaway (the group founded by Warren Buffett, the American investment guru).” 

This would be a dramatic step in his dogged campaign to reform Tata, a sprawling group whose size, longevity and influence makes it synonymous with Indian business as a whole. 

The group can trace its roots to 1868, to a trading company founded by Jamsetji Tata, who went on to take some of the first steps in the formation of the modern Indian economy, including the construction of the first steel mill and hydroelectric plant. 

Modelling itself on the colonial “managing agencies” — a structure under which British investors created mini-conglomerates to invest in India — Tata grew steadily, expanding into tea, consumer goods, steel, power, telecoms, hotels, pharmaceuticals and the motor industry, often in joint ventures with western groups. 

“Very often foreign companies could not enter the country alone,” said Ratan Tata. “The people they felt most comfortable with was Tata. We had Mercedes-Benz, IBM, CBS, and Honeywell. To us it was just one more business so we readily said yes and a new company was born.” 

The group eventually comprised 300 companies. But unlike western conglomerates, Tata had no obvious hold on the businesses it controlled. The central company, Tata Sons, typically held only a small equity stake in each, and most had their own listing on India’s stock markets. And the central company was majority owned not by the Tata family, but by two charitable trusts. 

Ratan Tata joined the company in 1962 after completing an architecture degree at Cornell university. At first he saw little wrong — Tata was, after all, the most respected business in India. But after four or five years, he said, he began to feel “frustration”. 

Things became worse in the 1970s under Indira Gandhi’s punitive “anti-monopoly” legislation. “We were often referred to as a loose confederation of companies headed by JRD Tata (Ratan Tata’s uncle) who was the patriarch and could emotionally and by virtue of his charisma hold his lieutenants together.” 

In some cases it was a recipe for disaster. Tata ran the four largest textile mills in India, but, rather than collaborate, they competed furiously, undercutting prices and copying each other’s designs. “The end result was that the competition was laughing at us and we went out of the textile business because all four mills lost money.” 

Ratan Tata fulminated. In the 1970s he wrote a long memo to JRD Tata setting out where Tata was going wrong and his strategy for setting it right. But the boss was unmoved. “He rejected it,” said Ratan. 

Their relationship improved, however, and towards the end of JRD’s reign, he and Ratan Tata became close. But it was never certain the younger man was going to get the top job — other executives seemed more likely candidates. 

When he did step up, he was the youngest director of Tata Sons. The others, contemporaries of JRD, were over 75. 

“Many of them never left their office because they could not travel much. They never met their dealers, never met their suppliers, never visited their plants,” said Ratan Tata. “The people who came to see them found the leadership was 15 years behind the business, and with no credible support, because the good people in the company had realised they did not have a chance and had left.” 

Ratan’s solution was simple. He introduced a retirement age, mandating that no Tata chief executive could be more than 75, later reduced to 65. This flushed out the old guard in the operating companies, but left the most powerful and obdurate on the board of Tata Sons. 

Once firmly in control, Ratan Tata was able to introduce his basic strategy. Each of the businesses was evaluated on its ability to be in the top three in the world, in its sector, its ability to be compete globally, and its profitability. Those that did not fit the bill, and some whose management rebelled at the new central control, were sold. 

In the remaining companies the core shareholding was increased, providing some protection against takeovers or errant boards. The average Tata holding across the group is now 26%, and Ratan Tata plans to raise this to 50%. 

Tata is now focused on seven core sectors — services, materials, engineering, energy, consumer products, chemicals and communications and information systems. Indian analysts point out that the sector definitions are broad enough to give Ratan Tata considerable freedom to act. 

The reforms have prompted comparisons with Jack Welch, the chief executive who transformed General Electric. But Ratan Tata said he could never have been so ruthless. 

“His approach was binary — you were either in or out. We could not have done that in India — our culture is so different. I would have been the greatest failure because everyone would have objected. There would have been a mass rebellion, and I think it would have negated the basic purpose.” 

But further reform — for example, the mooted listing of Tata Sons — is on the way. Ratan Tata said he plans foreign listings for several more Tata companies, and is looking at a number of acquisitions. 

One idea that was studied — and rejected — was the creation of a single group through a share swap between the myriad Tata businesses. Tata has stakes in companies with a combined market value of $23 billion (£12 billion), enough to make such a combined group India’s largest quoted company. 

“To take 80 companies and have all their shareholders agree to a swap ratio that would be fair to them, that is too difficult a task. But we could possibly do it with three or four at a time. Then perhaps instead of 80 companies, we might have 15. But that is a long way away.” 

Tata at a glance
Annual revenues of group businesses

• Tata Motors £1.7 billion 

• Tata Steel £1.5 billion 

• IT (inc Tata Consultancy Services) £1.1 billion 

• Tata Power £530m 

• Consumer products (inc Tetley Tea) £449m 

• Tata Chemicals £315m 

• Hotels £130m