Be bolder and take more risks
The Week — May 15, 2005

How will you build brand Tata into a global brand?
It has been only in the last seven years that we have created a common brand and a branding discipline. Now we are going to promote this brand in some of the countries, backed by our products. South Africa would probably be the first country that would see a major branding exercise, because the launch of our vehicles there has been well received. We have been awarded the second network operators contract, so we have enough happening there to spend money to promote the brand.

What is your target for international earnings in the next five years?
About 30 per cent of total group turnover. You may ask what is the big deal in going from 22 to 30 per cent? The difference is the complexion of what we will do. A fair amount of this 22 per cent is in trading. We will achieve 30 per cent by having an assembly or manufacturing facility and a serious commitment in those countries.

You have been buying steel and automobile companies abroad. What about the telecom sector?
There has been a change in our approach to growth in the last five years. We want growth by acquisition and organically. Earlier, Tata never undertook growth by acquisition. Today, in the automotive, tea, hotels and software we have had and will have acquisitions. We also have had acquisitions in telecom because the second network operators enterprise in South Africa is an existing one. The purchase of Tyco’s undersea cable network, which is the largest in the world today, is an acquisition. But, we have not been acquiring telephone companies. If there is something in the scale that we could afford or in the geography that we could manage, then yes we will go for it.

What kind of management structure are you putting in place here as the Tata group goes international?
We have created a very small group to look at our growth internationally. They have been looking at various countries in terms of opportunities and if there are companies available for partnership or acquisition. We need to be bolder, and willing to take bigger risks abroad. Time will make that happen.

Do you think corporate India is still diffident when it comes to the global arena?
There are a few groups that are very bold, much bolder than we are. Those companies will make big strides. But for the most part, Indian industry is a little shy of investing abroad.

What is holding back brand India?
People here are just realising the strength of branding but our government has not understood what it can do for the country. It is just beginning to realise that India as a nation can be branded and promoted and can benefit from it. Today, foreign industry has more respect for India and Indian companies because we are recognised among analysts—not just financial but political as well—and are being finally talked about as one of the up and coming powers of this region.

What about Indian manufacturing being recognised globally? Your group has done much to make Indian manufacturing known abroad.
We should, as a nation, promote our manufacturing sector enormously. For some reason, manufacturing is considered to be a revenue acquiring source by the government. So, manufacturing is often loaded with costs or fetters which its counterparts in other countries do not have. We are losing our position in the region as a competitive source of manufactured products to countries like Thailand and China. We should find a way out for manufacturing to have a bigger slice of the pie.

Why can’t we do the same with manufacturing as we have done with services?
There are a variety of issues. Sometimes the input costs are too high, we have shortages, we have many middle steps that inflate the cost of raw materials and inputs. Then we have labour laws which become an inflexible expense and when business cycles go up or down there is nothing you can do. For example, Telco faced such a situation some years ago when the market shrank by 40 per cent; we did not lose our market share but we could not do anything other than bleed.

There seems to be too much dependence on China in steel.
It is unfortunate. China has publicly stated that it will achieve 500m- tonne steel capacity. Today, the world consumes a billion tonnes. China may end up having 45 per cent of world steel capacity by 2010. Say, for some reason, there is a downturn. What will happen is frightening. Perhaps 200 to 300 million tonnes of that steel will go to the global market, probably at prices no one can compete with. The steel industry in Europe and parts of America will collapse. India is insulated in that sense.

Coming in 2008: The mean machine displayed at the Geneva motor show
Another scenario is that China may not collapse the steel industry but may use all that surplus steel to make value-added products. Automobiles and white goods may come into the market at competitive prices. The kind of capacity that China is creating makes you believe that it will be the factory of the world.

Tata Motors is one of the group’s major focus areas of growth. What new models and segments will you be targeting in the near future?
We are looking at strengthening our existing segments, which constitute about 60 per cent of the market. We are not looking at the upper segment because other companies are bringing in products from their stable abroad. What we are also looking at is a mass produced car at low cost, which can be positioned between today’s motorcycle and the lowest car. If that is successful we might take it to other developing countries.

An economic columnist, in a recent article, wrote of a hypothetical scenario where Tata Motors buys out General Motors.
We first have to walk before we run. At the same time, the bold steps taken by Laxmi Mittal and others in making acquisitions of huge proportions are indications that boldness is not foolishness.

Given your group’s size, you still have not made large acquisitions.
Acquisitions do not necessarily mean buying. If we took over the management of a hotel, we may not buy it but we would still be in that country in a significant way. We have been a little shy of making huge acquisitions. And we probably have lost some opportunities. I don’t want the group to make acquisitions just to talk about it. We should be able to digest acquisitions and allow it to imbibe the same values that we have here. So, the integration of cultures is important. Naturally, the process will be slower than others. Take the GM example; whose culture would survive? Where would be the fit? We would be lost in the rush.

How do you look at integrating a global work force into Tata culture?
Chemistry is an extremely important issue. We do a lot of homework to make sure that the acquired company fits into our culture and value system. While we would like the acquired company abroad to retain its best practices based on the local culture, if we find that a company follows practices that we are not in agreement with, we would not go into it.

The global foray has been a long time coming. Did you want to consolidate in India first?
It was all about our internal resistance to change, particularly when you have a new person come in and advocate this change. We talked about the brand, going abroad or growing through acquisitions. There was a time when all three were not considered worthwhile. Sometimes the only solution is to create your own team.

But it is your vision and your leadership. You have another three years to go. Do you ever feel you may run short of time?
I wish there was more time. The one thing I have been trying to do in the 10 years I have been here, is to change this organisation from a personality-oriented one to an institutionalised one. To have less of that mercurial individual style and to have more of the group style. We wanted to create great mobility between the companies. Move CEOs. But we have not done all we wanted. The idea is to put in place an institution which would not be so dependent on an individual but have a style and functioning that will continue.

The Tata Group and you have always had a low profile. Will that change?
I will say one thing. I did the group a disservice by allowing it to understate itself. The group now has more visibility, has more media coverage and we are less shy of the media. But, we still seem to frown on individuals gaining media prominence in the group, and whether that is good or bad I really do not know. Anything in moderation is OK.

What is your reaction to the statement that what is good for corporate India is good for India?
What I find in India is, and I think it is a sad thing, that you cannot put 10 corporates in a room and come out with something that moves the nation forward. So, theoretically, what you say is true: what is good for corporate India should be good for India provided everybody is working for the nation.

At what stage is the Rs 1 lakh car?
We are now going to start productionising it. It is in the prototype stage and prototypes are running. The car should be out some time in 2008. Its cost will be somewhere between a motorcycle and a car. For arguments sake, if a motorcycle is above one lakh, the car would not be one lakh. But it has been a very good exercise, as it has forced us to apply a constraint which we would otherwise not do.

Will Tata Sons go public?
Right now there are no plans.

When would the Daewoo trucks be available in India?
Next year. They may not be Daewoo trucks made in Korea; they may be assembled in India. Light commercial vehicles made in India that Daewoo does not have may be assembled in Korea. Korea already has the Tata brand. We have changed the name of the company to Tata Daewoo. The vehicle will be branded Tata. But in some geographies, Daewoo is better recognised and if we brand it Tata it will have no recognition.

When will the car displayed at the Geneva motor show be launched? And what other models are planned?
It will be launched in 2008. The next major releases will be a new Indica and Indigo. There will be variants of the existing cars but there will not be a new car from the ground up. We will shortly be launching a small commercial one-tonne vehicle, which will have a passenger version too, similar to the Omni.

Any regrets about taking over VSNL?
It was not that VSNL did not give us the right value. VSNL does have everything we thought it would have. What we have had to do is to change its business because its original business became unremunerative because of what the government did.

There is no clarity on your successor.
The main issue of clarity or uncertainty at the time I go is whether I put someone in place or not. I don’t see why we are talking about it three years ahead. I have reasonable clarity in my mind.