Tata sees a third of group business done overseas
Business Standard — March 14, 2005

Ratan Tata would like to see the overseas share of his group’s turnover climb from 20 per cent today to the 30-35 per cent range in five years because this makes the group less susceptible to business cycle swings in a single economy. In an interview to Business Standard in his Mumbai office last week, Tata said some of the increase in the group’s international turnover will come from organic growth, and some from takeovers in areas like hotels, where the group is actively scouting for opportunities.

Explaining the logic of going international, he said, “We feel that this broader base is going to equip us better against a downturn.” Tata said the group had made some bold moves overseas through the acquisition of companies like Daewoo and Tyco. Further, he said, he had been able to improve the performance of the international companies that the group had taken over, including Tetley.

The Daewoo truck plant in South Korea, for instance, has improved its domestic market share from 26 per cent to 33 per cent after the Tata takeover. Tata said the group had allowed the companies that were taken over to retain the “face, touch and feel” of a local company while still managing to integrate product plans and strategies. Daewoo’s trucks would soon be sold in India, he added.

He pointed out that the group had been doing very well in South Africa, where the recent launch of the Indica has been the most successful in that country’s automobile history. Also, Tata has become South Africa’s second network operator and will soon be applying for a mobile licence. It is also the largest in the data area. Looking back at how he has been able to change the group over the past decade, Tata exuded a sense of quiet satisfaction at what had been achieved.

He said the group had more than quadrupled turnover (to over Rs 61,000 crore) while the return on net worth had improved dramatically from 16.7 per cent to over 26.6 per cent. All the major group companies are now yielding a return that is greater than the cost of capital — which was not the case earlier. Tata added that the group was more cohesive and integrated today, and therefore able to better converge on goals.

Asked whether the group was being seen differently by the public today, he said this was in part a result of the group’s more cohesive image but he did not place much store by the change because some of it reflected a different phase in the business cycle. However, he felt that doing business in India while emphasising ethics and values was still a constraint. He added that he was heartened that the group has been able to grow without compromising on this issue.

In response to a question on unfinished business, he said group restructuring was a continuous process, and while the group is less risk-averse today, there is a human resistance to change.