Tata's 100 years of steeling the thunder
The Economic Times — August 26, 2007

From the acquisition of Corus for a whopping $13 billion — the largest acquisition abroad by an Indian company - to the model town of Jamshedpur finding a place in the UN Global Compact Cities pilot programme, Tata Steel has been there and done all of that.

While the acquisition of the Anglo-Dutch company makes Tata Steel the world's fifth largest steelmaker with a combined turnover of almost $25 billion, shaping history is not exactly new for the group. Jamsetji Nusserwanji Tata (1839-1904) realised that India's real freedom depended upon self-sufficiency in scientific knowledge, power and steel, and thus devoted the major part of his life, and his fortune to three great enterprises - Indian Institute of Science at Bangalore, the hydroelectric schemes, and the Iron & Steel Works at Jamshedpur.

Pan back a 100 years and Tata Steel, which is India's largest private sector steel company, was established in 1907. Today it is also among the lowest cost producers of steel in the world. Besides Corus, Tata Steel has also included in its fold NatSteel, Asia (2 mtpa) and Millennium Steel (now Tata Steel Thailand) (1.7 mtpa) creating a manufacturing network in markets in South East Asia and Pacific rim countries. Even as the company turns a 100 today, B Muthuraman, MD, Tata Steel speaks on issues as wide ranging as integration of Corus to the rock solid values of Jamsetji. Excerpts:

It has been an illustrious journey of 100 years for Tata Steel. How do you feel about it?
Our journey through the last 100 years has been a story of corporate governance; customer delight, creation of wealth and sustaining the well being of our society and nation. Tata Steel, India's first integrated steel company, has achieved numerous landmarks and accomplishments following the principles laid down by the founder. To constantly grow and evolve was the dream of our founding fathers when they started their journey of steel making. I feel honoured as we celebrate 100 years of following the enduring values propounded by Jamsetji Nusserwanji Tata.

The buying out of Corus has been a major landmark for Tata Steel in its global expansion plans. To what extent has the integration process between both companies progressed?
Our prime focus currently is to execute smoothly the successful integration between the acquired companies so that it benefits all of us.

The integration process is moving steadily between the two organisations, Tata Steel and Corus, with common principles and ideals.

With the consolidation of the steel industry around the world, how do you foresee the sector five years from now? And where do you place Tata Steel in the global scheme of things?
Going forward, I feel that future of steel industry would depend on firstly attracting and retaining the talent that will be required to keep the industry competitive, productive and technically competent. The recent consolidation wave and hi-tech improvements have changed the steel industry, presenting a greater need for technically trained employees and engineers.

On the environment management front, the global economy is witnessing unprecedented growth, led by emerging economies such as India and China finally joining the global economic systems. This means that these countries will soon join the ranks of major greenhouse gas-discharging nations. Intensified efforts would be required to run the operations in an eco-friendly manner, which would mean that the industry needs new technology as a means of tackling environmental concerns, flexibility in use of raw materials and production process, use of low grade raw materials, producing high quality metallic products and lowering the capital expenditure and cost base of steel production.

For Tata Steel, the challenges faced on the immediate front is tackling efficiently the successful integration between the companies, timely execution of greenfield projects in India and securing quality raw materials (especially iron ore and coal). Though Tata Steel's indigenous iron ore mines in India may be sufficient to meet the current requirements of its Indian operations at Jamshedpur, we import about 40% of the coal requirement at Jamshedpur operations. We are evaluating strategic options for iron ore and coal to vertically integrate our operations and maintain profitability.

With our Jamshedpur expansion plans and greenfield plants going on stream, we aim to become the world's number two steel maker by 2012. This objective will be supported by intensifying efforts to vertically integrate our operations to maintain our status as the lowest cost producer of steel in the respective regions; gain stronger foothold into downstream businesses; and increase efforts in the direction of decommoditising steel to beat the industry trend in a situation of over-supply / downturn. While doing this, we would simultaneously draw out the road map with key milestones to realise our dream of becoming a 100 million ton company.

Do you think that some of the global steel giants may go for hostile takeover of Indian steel companies?
Internationally, the steel industry is highly fragmented and this has led to a lot of M&As and indeed, hostile bids in the recent past. And India and China being among the fastest growing steel markets in the world, there is an increased need to consolidate.

Given this background, it would be safe to say that the steel industry is considerably vulnerable and the only way to safeguard is to increase promoters' stake over time. Tata Sons currently holds 34 per cent stake in our company and plans to increase this by another 10 per cent shortly.

With the Tata Steel setting out on a major acquisition spree in various parts of the globe, what do you think are the major challenges, including cross-cultural differences in the integration process?
Like I said earlier, NatSteel and Millennium Steel fitted our strategy perfectly as these had finishing capabilities in the growth markets of South East Asia. Through the acquisition of Corus, Tata Steel reached 6th position (erstwhile 56th position) in the world in terms of production giving us a foothold in the developed markets of Europe, access to the strong product portfolio and research and development facilities in Corus.

Tata Steel, NatSteel, Millennium Steel and more recently Corus, all share very similar work ethics and culture which is fundamental to the success of any post acquisition integration process. Tata Steel's integration process lays stress on constant and seamless communication between not only the top management of both the companies but also between the operating units, to inculcate respect for each others' culture.

This will help in developing appropriate 'performance culture' and 'operating model' of the enlarged entity. We have retained the management structure in all our companies. The task that lies ahead of us is executing smoothly the successful integration between the companies.

Tata Steel has been a pioneer in building industrial townships, for instance Jamshedpur. What has been your secret in sustaining these, considering that the trend of developing such townships failed to catch up in the rest of India?
Make sure to lay wide streets lined with shady trees. Be sure that there is plenty of space for lawns and gardens. Reserve large areas for football, hockey and parks. Earmark areas for temples, mosques and churches - this philosophy of our founder Jamsetji Tata is what is being followed in Tata Steel for the last 100 years.

The steel city way back in 1919 was born with the most advanced civic and municipal facilities for the employees of Tata Steel, which was a model for the entire nation. The philosophy of returning to the community what you take from it has been the guiding factor and inspiration for us over the 100 years that has enabled us to move with the times and modify our township in order to provide the best amenities to the people who serve us.

Coming to a macro question, do you feel that India will be able to achieve a double digit GDP growth and sustain it?
The 8 per cent GDP growth in India is no longer just a flash in the pan. The country has gradually achieved a sustainable rate of growth over the last few years. The policies are progressive and opportunities galore. Every industry is thriving and India has come to be the apple of the eye of investors. Sound policy and development driven economics combined with improvement in socio-economic indicators - especially in rural India - would be a great combination to achieve sustainable double digit growth.