The man who steered Indian business into global waters

WHen a long public life like that of Ratan Tata comes to an end, Indians have a tradition of heaping lavish praise on the memory of the departed, leaving aside some of the not-so-palatable parts of the departed’s story. So, a measured assessment of the person’s position in the history books must wait for some time. But within these limitations, a view has to be taken right away on what Ratan Tata did and did not do. And ask ourselves if he has left behind what is worth remembering.

In fairness, it can be said that the economic consequences of the life and legacy of Ratan Tata made public life richer and better. He should be a role model for upcoming scions and startup new promoters which, hopefully, will take the economy forward and make the country a better and kinder place to live in.

Tata took over India’s largest business conglomerate in 1990 when India had not yet started opening up but he made the group move with the times and helped make the economy incalculably more robust and self-confident. The symbol of this is the Tata Consultancy Services, the most profitable group company, which grew under the umbrella of the group’s leadership to become one of the most globally respected information technology players that enabled India to coin the slogan ‘Make in India, for the world’.

He was born (1937) when India was still ruled by the British but now leaves behind it as the fifth largest economy in the world. Under his leadership, the group restructured internally, and in the beginning of the current millennium went forth across the world to acquire some of the most globally known brands. Successes were totted up even as mistakes were made, but today the group is able to stand up on its own feet in the global business arena and keep going forward.

Here are some numbers `which give an idea of the transformation that the group went through between 1991 when Ratan Tata took over the leadership of the group and 2013 when he retired. Revenue went up from Rs 600 crore to Rs 5,000 crore (rounded off). The bottomline, profit after tax (PAT), went up from Rs 9 crore to Rs 17 crore.

On the other hand, return on equity (what the group’s own money earned) fell from 16 per cent to 12 per cent (again rounded off). So the group paid a price to be able to go global. Market capitalisation (market value of all the shares), however, rose from Rs 9,000 crore to Rs 5 lakh crore. Thus, despite the group seeing a fall in its own money, the capital market expressed confidence in the group leader by raising by multiple amount the public-quoted value.

Now let is retell the story in terms of flesh and blood, the companies which were impacted by the numbers. When Tata took over, the group was led by biggies like Telco (now Tata Motor), Tisco (now Tata Steel), Tata Electric companies, Tata Hydro-Electric, Andhra Valley Supply, Associated Cement (ACC) and Tata Chemicals.

Through the nineties the group also acquired consumer goods portfolios through Lakme (cosmetics), Tata Oil Mills (soaps), Goodlass Nerolac (paints), Merind (pharmaceuticals), Voltas (air-conditioners), Titan (watches), Tata Tea, Tata Coffee and Tata Press (printing). Plus, very importantly, the group was an important player in computer hardware with joint venture with IBM and telecom equipment through Tata Telecom in partnership with AT&T.

However, the group saw a challenge in long term viability in domestic consumer goods. This led to a period of pruning. This freed up capital and managerial resources and enabled Ratan Tata to enter the global arena for growth in sectors where the Tatas had the potential to become global leaders.

Then in the new millennium, the group acquired the UK’s Tetley, making Tata Tea the world’s second-largest branded tea company after Unilever. Tata Motors acquired the heavy vehicles’ unit of Daewoo Motors, thus becoming one of the top global truck motors. Thereafter came the big acquisition, Jaguar Land Rover, again catapulting the Tata player, Tata Motors, to become one of the leading global players in the field. Then Tata Steel acquired Corus, seeking to become a leading global steel player.

With such mega acquisitions taking place, not every turn out to be a winner. The acquisition of Corus did not become a success. Former Tata Steel managing director JJ Irani described the action as an “acquisitional mistake”.

In the category of mistakes, also comes the Nano project with which Tata saw the vision of producing a Rs 1-lakh people’s car that would allow the family on a scooter to switch to a car. But its cost went up and most importantly the car couldn’t meet the upwardly mobile picture of an aspirational car owner. Eventually, the product was closed down.

Hard business apart, Ratan Tata was known for his ethical leadership style and his values of trust and reputation. He was also known for his modest and unassuming style. Under his leadership, the group became known for its employee-centric approach while offering a variety of benefits and welfare programmes. For example, Tata Motors has a health and wellness programme that includes insurance, medical facilities, and health check-ups. On Glassdoor, the Tata Group has an employee rating of 4.0 out of 5 stars.

Ratan Tata also became wedded to the need to become environmentally responsible. Initially, he thought diesel autos made business sense but he changed his mind when he realised that diesel produced a lot of very small particulates which travelled and stayed put in our respiratory system.

Overall, it can be said that he looked forward and took risks. Some of them paid off, some didn’t. But he went on, keeping in view the need to be a responsible employer and environmental practitioner. So, he has given a role model which can make the economy richer in an environmentally sustainable manner.

We can end with two anecdotes which tell more than numbers and names do. When he was put up at a posh hotel suite in Washington as leader of the corporate team that accompanied Prime Minister Manmohan Singh, he sought out and moved to a single modest room. In 1984, when many Sikh truck owners’ vehicles were destroyed in the anti-Sikh riots after the death of Indira Gandhi, Tata Motors immediately replaced all the destroyed trucks without any condition of repayment. Ratan Tata’s logic was that if we have prospered by them, we will stand by them in their hour of the greatest need.