Posted by: John Elliott | December 29, 2012

Ratan Tata, India’s sensitive and visionary tycoon, steps down

Ratan Tata’s retirement yesterday, on his 75th birthday, from the chairmanship of Tata Sons, India’s biggest conglomerate, marks the end of an era for Indian business as well as the group. No-one has bestraddled Indian business in the way that he has done, presiding over Tata’s $100bn-plus revenues, more than half from 80 countries overseas, with over 450,000 employees in 100 operating companies and interests ranging from tea to telecoms, software to hotels, wrist watches to defence rockets, and coffee (Starbucks) to power and steel.

There is no other Indian business figure of similar stature, and no one near to being able to take his place as a symbol of managerial ethics and success. Mukesh Ambani who runs Reliance Industries, which vies with Tata for the top slot, does not have the respectability, and his younger brother Anil is not even at the starting grid. Kumar Mangalam Birla has made a substantial success of one branch of the old Birla family group that matched Tata’s commercial importance 30 years ago, but he is ever more shy than the withdrawn Mr Tata.

Ratan Tata and his successor, Cyrus Mistry

Ratan Tata and his successor, Cyrus Mistry

Rahul Bajaj likes to be heard, but has retired from his two-wheeler business and his sons are relatively low profile. Families such as Godrej, Mahindra, Singhania, and Munjal (Hero) are not dominant enough and mostly do not have the charisma, while others like the Jindals and Ruias (Essar) are in a different league. In new technologies, Azim Premji of Wipro could qualify but he has too narrow a base, while Narayan Murthy, one of Infosys’s founders, has retired to mentoring. Deepak Parekh of HDFC and a veteran chair of government committees could have qualified, but he too has largely retired.

This raises the question of what Mr Tata’s leadership has actually symbolised and provided, and what is the gap left by his retirement after 21 years in charge?

The answer can be found in the way that he has led the group itself. He took over in 1991, the year of India’s economic reforms, first uniting the loosely run group under the Tata banner, ousting elderly satraps, and then using opportunities unleashed by the reforms to spend $20bn on foreign take-overs and become India’s first group with $100bn revenues (2011-12). His dream for 2020-21 is $500bn.

He strove for a corruption-free group, and lost influence in Delhi and elsewhere as a result – he has always seemed uncomfortable with the complexities of political and corporate corruption that has grown enormously in India during his time as chairman. “I can say, with my hand to my heart, that we have not in fact partaken in any clandestine activity,” Mr Tata said last year when being questioned about his group’s involvement in a far-reaching telecoms scandal.  “I think there are many honest businessmen. There are many that bend. I am happy that I have not bent”.

But such a massive array of businesses could never fully match the “exemplary” ethics and values that he has said he would like to be his legacy. He unwisely hired and promoted Nira Radia, an influence peddler at the centre of a telecoms-linked political crisis in 2010, as his trusted public and government relations adviser.

His companies’ environmental record has also not always been as good as he would like it to appear, especially in the extractive industries, and his lack of concern was demonstrated by the construction of Dhamra Port in Orissa in 2008.

Watching him as a reporter since I first met him in the mid-1980s, when he was working his way towards becoming Tata Sons chairman, I’ve learned that he feels personal hurt deeply. This has made him ultra-sensitive and unforgiving over what he considers unfair media coverage (see below), and also unforgiving to senior executives who have displeased him. His public relations and statements have not always been as straightforward as they might have been, though it is perhaps because of the pedestal on which he stands that such criticisms are aired. His stature has been matched by his personal reticence. He has never married, but told CNN last year that he had been in love and almost did so four times, each time backing off “in fear or one reason or another”.

His biggest contribution has been to spearhead Indian companies’ foreign investments abroad, starting rather unexcitingly with the purchase of Tetley Tea in the UK in 2000. Much more significant was a take-over of South Korea’s Daewoo truck manufacturer in 2004. This was a trailblazer because it showed that someone in India’s largely unimpressive and uncompetitive manufacturing industry had the ability and nerve to venture abroad. I have always thought that this deal was a turning point in Indian industry’s self-confidence, which then grew rapidly in the mid-late 2000s.

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It led on in 2007 to Tata Motors’ $2.3bn purchase from Ford Motor of Britain’s Jaguar Land Rover business, which has been a huge success.

(I am happy to admit I was wrong in March 2008 when I suggested on this blog that it might be unwise for Tata to have bought into the “history of trouble” at this last remaining lame duck of the UK’s once proud motor industry. That post, which initially ran on Fortune magazine’s website, drew the blog’s biggest ever readership of 49,000 in one day and 75,000 in three days, with critical comments.)

What I and other sceptics had not foreseen was that, by capitalising on design work started but not carried through by Ford, Tata had the energy, finance and managerial strength to produce impressive new models (above) and expand sales internationally, especially in China.

This demonstrated Mr Tata’s capacity to drive through his decisions, as he also did, against advice from senior colleagues, on his far less successful $11bn take-over in 2007 of Europe’s Corus steel business that has left Tata Steel heavily indebted.

He then spearheaded the sadly misguided concept and launch in 2009 of the Nano, the world’s cheapest car, which failed to take off. Aspirational Indian families, who Mr Tata dreamed of upgrading from unsafe over-loaded scooters, did not want to own the world’s cheapest product – it has now been re-launched slightly upmarket and is doing better. The Nano has often been praised as an example of low cost manufacturing, but its price was due to state government subsidies and squeezing component suppliers’ margins in addition to what is now fashionably called frugal engineering.

The story is well told in a Tata-promoted book, Small Wonder – the making of the Nano, which tracks the excitement and brain-storming of the car’s development, with revolutionary early ideas that were abandoned such as having soft shutters instead of doors and assembling it at small workshops around the country. Eventually, the car did not break any significant new ground and made frugal engineering an end in itself, whereas it should be used to develop new ideas at low cost – as has been shown for example by the plastic-bodied Reva electric car developed by the Mainee family of Bangalore and now part of the Mahindra group.

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Tata Motors was the company where Mr Tata had most direct interest and influence and he spent yesterday, his last day at work, at its Pune factory.

But the company’s India operations need an overhaul now that it is no longer controlled by the patriarch, as do the steel and telecommunications businesses plus, according to some reports (left),the Taj hotels. The company that needs least attention is TCS, the group’s information technology cash cow.

My first experience of Mr Tata’s media sensitivity was over a profile I wrote on him in The Economist in 1996. It was heavily edited, and the published version compared him and his satraps with feudal rule in medieval England, headlined At the court of King Ratan. Unsurprisingly, he was not impressed, and I arranged to meet him to smooth things over.

A few years later, when I was involved with Fortune magazine, a visiting reporter wrote a long and unflattering article in April 2002 headlined one of India’s most beloved companies…is also a mess.  Mr Tata had spent time with the author, including a helicopter trip with him at the controls, and he was furious, feeling let down. That prevented any formal contact between Fortune and the group for most of the rest of the decade. Such blacklisting is not unusual. Last year there were reports that companies were being advised not to advertise with some Indian media outlets because of their coverage of the telecoms and Radia scandals.

Mr Tata’s final weeks have seen another media upset, which led him to curtail his availability for interviews . The Financial Times met him earlier this month and, in the first of three articles, quoted him blaming the government for speaking with too many voices and slowing investment decisions. He also gave an interview to Tata’s in-house communications executive where he said his successor would have the challenge in India of sticking to Tata’s ethics or “surrendering to a venal system”.

The two interviews were rapidly reported together in the Indian and international media, highlighting the word “venal”, which led to the in-house interview being quickly removed from the website (it is still on this newspaper site). Tata also issued a denial that both implied (inaccurately) that the FT had used the word “venal”, and secondly denied, somewhat implausibly since it had been an in-house interview, that Mr Tata had ever said used the word “in any manner”. That prompted a column in the Business Standard listing other occasions where Mr Tata had denied saying that he had said.

Such upsets are inevitably remembered by those involved, but they should not and cannot detract from the record of iconic leadership that Mr Tata has provided over the last two decades. He has changed many parts of the group and led it abroad to many countries including the UK where it is the largest private sector employer. He did that at a time when other big Indian companies, which thrive by bribing the Delhi and state governments, were shy of venturing into unknown territories.

He now retires to be chairman of the Tata’s charitable trusts that own 66% of the group, having handed over as chairman of Tata Sons, the main holding company, to Cyrus Mistry, a 44-year old businessman linked to the Tata family by marriage and the Parsi religion, and to the group by an 18% family equity stake.

To answer my questions at the start of this article, Mr Tata’s leadership has symbolised ethics and vision, despite a few bumps, and the gap left by his retirement is the absence of an Indian businessman with a similar renowned image in India and abroad.

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Responses

  1. I like the way you have covered both positive and negative aspects of his leadership and highlighted amazing achievements. When I went through the first paragraph and saw Starbucks mentioned, I couldn’t help but wonder how much Tata group has benefited from India’s closed economy which forced global players to enter Indian market with Tata’s. In spite of all that, Ratan Tata will stand tall as a visionary leader.

  2. A true sign of Ratan Tata at his best that JLR over the last two years has made more in profit than what he paid for it in 2007! Great summary of a legendary global businessman…what shoes to fill Mr Mistry!

  3. A balanced portrayal!

  4. John

    Simple subtle comment “What Reliance does brazenly and May be arrogantly; Tatas do the same with a Finesse” in Telecomm both played dirty tricks in 2003 and again in 2008, causing a loss of some Rupees 20, 000 crore. See my piece in the ET of 20 December 2012. No Indian business is a holy cow. They all treat our banking system as family current acccounts.

    They have hidden agendas to stop the development of the country by creating road blocks for MNCs. They play their inerncine wars to dwarf development

  5. Thanks for the balanced view in the sea of hagiography. Nice to know he has feet of clay like the best of us.


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