Ratan Tata, the philanthropist and former chairman of Tata Group who has died aged 86, performed an instrumental position in globalising and modernising one in all India’s oldest enterprise homes.
His capacity to take daring, audacious enterprise dangers knowledgeable a high-profile acquisition technique that saved the salt-to-steel conglomerate based 155 years in the past by his forefathers related after India liberalised its economic system within the Nineties.
On the flip of the millennium, Tata executed the largest cross-border acquisition in Indian company historical past – shopping for Tetley Tea, the world’s second largest producer of teabags. The long-lasting British model was thrice the scale of the small Tata group firm that had purchased it.
In subsequent years, his ambitions grew solely larger, as his group swallowed up main British industrial giants just like the steelmaker Corus and the posh automotive producer Jaguar Land Rover.
Whereas the acquisitions didn’t all the time repay – Corus was purchased at very costly valuations simply earlier than the worldwide monetary disaster of 2007, and remained a drag on Tata Metal’s efficiency for years – they had been huge energy strikes.
In addition they had an awesome symbolic impact, says Mircea Raianu, historian and creator of Tata: The International Company That Constructed Indian Capitalism. He provides that they “represented ‘the empire putting again’ as a enterprise from a former colony took over the motherland’s prize property, reversing the sneering angle with which British industrialists appeared upon the Tata Group a century earlier”.
International ambitions
The Tata Group’s outlook had been “outward-oriented” from the very starting, based on Andrea Goldstein, an economist who printed a research in 2008 on the internationalisation of Indian corporations, with a specific give attention to Tata.
As early as within the Nineteen Fifties, Tata corporations operated with overseas companions.
However Ratan Tata was eager to “internationalise in large strides, not in token, incremental steps”, Ms Goldstein identified.
His unconventional training in structure and a hoop facet view of his household group corporations might have performed an element in the way in which he considered enlargement, says Mr Raianu. Nevertheless it was the “structural transformation of the group” he steered, that allowed him to execute his imaginative and prescient for a worldwide footprint.
Tata needed to battle an distinctive company battle at Bombay Home, the group headquarters, when he took over because the chairman of Tata Sons in 1991 – an appointment that coincided with India’s resolution to open up its economic system.
He started centralising more and more decentralised, domestic-focused operations by displaying the door to a string of ‘satraps’ (a Persian time period which means an imperial governor) at Tata Metal, Tata Motors and the Taj Group of Resorts who ran operations with little company oversight from the holding firm.
Doing this allowed him not solely to encompass himself with individuals who might assist him execute his world imaginative and prescient, but additionally stop the Tata Group – protected thus removed from overseas competitors – from fading into irrelevance as India opened up.
At each Tata Sons, the holding firm, in addition to particular person teams inside it, he appointed foreigners, non-resident Indians and executives with contacts and networks internationally within the administration workforce.
He additionally arrange the Group Company Centre (GCC) to supply strategic route to group corporations. It supplied “M&A [mergers and acquisitions] advisory assist, helped the group corporations to mobilise capital and assessed whether or not the goal firm would match into the Tata’s values”, researchers on the Indian Institute of Administration in Bangalore wrote in a 2016 paper.
The GCC additionally helped Tata Motors elevate cash for high-profile buyouts like Jaguar Land Rover which dramatically modified the worldwide notion of an organization that was basically a tractor producer.
“The JLR takeover was broadly seen as ‘revenge’ on Ford, which had derisively refused to accumulate Tata Motors within the early 90s after which was overwhelmed to the punch on the deal by Tata Motors. Taken collectively, these acquisitions prompt that Indian corporates had ‘arrived’ on the worldwide stage simply as progress charges had been selecting up and the liberalising reforms bearing fruit,” says Mr Raianu.
Right this moment, the $128bn group operates throughout 100 international locations with a considerable portion of its whole revenues coming from outdoors India.
The misses
Whereas the Tata Group made important strides abroad within the early 2000s, domestically the failure of the Tata Nano – launched and marketed because the world’s most cost-effective automotive – was a setback for Tata.
This was his most formidable challenge, however he had clearly misinterpret India’s shopper market this time.
Model consultants say an aspirational India didn’t need to affiliate with a budget automotive tag. And Tata himself ultimately admitted that the “poor man’s automotive” tag was a “stigma” that wanted to be undone.
He believed there may very well be a resurrection of his product, however the Tata Nano was ultimately discontinued after gross sales plummeted yr on yr.
Succession on the Tata Group additionally grew to become a thorny concern.
Mr Tata remained far too concerned in operating the conglomerate after his retirement in 2012, by way of the “backdoor” of the Tata Belief which owns two-thirds of the inventory holding of Tata Sons, the holding firm, say consultants.
“With out assigning Ratan Tata blame for it, his involvement within the succession dispute with [Cyrus] Mistry undoubtedly tarnished the picture of the group,” says Mr Rainu.
Mistry, who died in a automotive crash in 2022 was ousted as Tata chairman in 2016 following a boardroom coup that sparked a long-running authorized battle which the Tatas ultimately received.
An enduring legacy
Despite the numerous mistaken turns, Tata retired in 2012, leaving the huge empire he inherited in a a lot stronger place each domestically and globally.
Together with big-ticket acquisitions, his bid to modernise the group with a pointy give attention to IT has served the group nicely through the years.
When lots of his huge bets went bitter, one high-performing agency, Tata Consultancy Providers (TCS), together with JLR carried the “useless weight of different ailing corporations”, Mr Raianu says.
TCS is as we speak India’s largest IT providers firm and the money cow of the Tata Group, contributing to three-quarters of its income.
In 2022, the Tata Group additionally introduced again India’s flagship provider Air India into its fold roughly 69 years after the federal government took management of the airline. This was a dream come true for Ratan Tata, a educated pilot himself, but additionally a daring wager given how capital intensive it’s to run an airline.
However the Tatas appear to be in a stronger place than ever earlier than to take huge daring bets on all the things from airways to semiconductor manufacturing.
India underneath Prime Minister Narendra Modi seems to have clearly adopted an industrial coverage of making “nationwide champions” whereby a number of massive conglomerates are constructed up and promoted so as to obtain fast financial outcomes that reach throughout precedence sectors.
Together with newer industrial teams like Adani, the decks are clearly stacked in favour of the Tata Group to profit from this.