ON December 28, 2002, silently but surely, something changed forever at the $10.4-billion Tata Group. The chairman of one of India’s best-known and most respected industrial groups, Ratan Naval Tata, turned 65 and stepped down as the executive chairman of Tata Sons, the Group holding company, in keeping with the group’s retirement policy. The board of Tata Sons has formally appointed him non-executive chairman with effect from December 29. With this move, Tata gave up his executive position, and adopted the role of patriarch, directing the steel-engineering-infotech empire from behind the scenes rather than from the frontline. Ratan Tata has had a chequered innings at the helm of the Tata Group, joining it in 1962 and working in various group outfits, before being appointed director-in-charge of National Radio & Electronics Company (Nelco) in 1971. Ten years later, he was named chairman of Tata Industries Ltd, which he transformed into a group strategy think-tank and promoter of new ventures in high technology businesses. Another decade later, he was appointed chairman of the group’s apex body, Tata Sons. The Tatas’ infocom foray began soon after the government initiated economic reforms. Today, TCS is Asia’s largest software company with a total revenue of Rs 4,187 crore. Contributing almost 40 per cent of the group’s total profit kitty, the 34-year-old TCS is the official jewel of the Tata crown, pipping Tisco and Telco. The company — with a net profit estimated at slightly below Rs 1,000 crore for March 2002 — has grown dramatically during the past decade, doubling revenues every two years for the past six years. The company, under CEO S Ramadorai, is now racing to become a billion-dollar company by this fiscal end. With 92 offices around the world, including 33 in the US, TCS is also the most ‘‘international’’ of the Tata Sons subsidiaries. Half of its revenues come from outside India, compared with five per cent for the whole group, and expectations are soaring. ‘‘I see TCS becoming very strong in IT services — in communications and in telecom infrastructure,’’ Tata told Fortune magazine early this year. The group is now giving finishing touches to its plan to list TCS in the stock exchanges in 2003. ‘‘TCS is the most awaited IPO from the Tatas in recent years. It will not only ignite investors’ interest in the company, but will also help the entire primary markets to recover,’’ says Venkatesh Aiyar, a member of the BSE. NEW BLOOD SOON after taking over, Ratan Tata promoted young blood across the Group, while old satraps fell by the wayside. Says Ajit Kerkar, former chairman and managing director, Indian Hotels: ‘‘The difference in work culture between JRD and Ratan Tata was stark. But in hindsight, Ratan’s path was perhaps correct, as the Group needed a change of culture to survive in the post-liberalisation era.’’ (see interview alongside) Though the Tatas faced criticism for planning to get VSNL to invest Rs 1,200 crore in the loss-making Tata Teleservices, the government and the Group finally agreed that VSNL will invest Rs 800 crore in Tata Teleservices. Says Shailendra Kumar Gupta, a former bureaucrat and now MD of VSNL: ‘‘The Tatas’ takeover of VSNL has energised the entire company. My role has not changed after VSNL’s privatisation and I continue to have all the freedom and authority as Managing Director. There is definitely much more flexibility in operations today. In a non-monopoly scenario, you are always under pressure. And that’s the challenge.’’ The takeover, and subsequent activity on that front, has sent one clear message: VSNL aims to be India’s biggest telecom company. The company has formed one of India’s biggest mobile phone monoliths by joining hands with the Birlas and AT&T to create ‘Idea’ — a multi-circle mobile phone operator. The Tata telecom gameplan is an interesting mix of cellular telephony and the code division multiple access technology, popularly known as ‘limited mobility’ services. Today, Idea offers mobile phone services in almost all circles, basic phones in Andhra Pradesh, Gujarat, Tamil Nadu, Karnataka and Delhi, and in the next few years plans to wire up the entire country under the ‘Tata Indicom’ brand name. To meet its infocom goals, the Group is taking all the help it can from get among Group companies. Tata Power, which laid the fibre optic network in Mumbai in addition to over 600 km ring network in the Mumbai-Pune region at a total investment of Rs 100 crore, will help Tata Teleservices provide the ‘‘last mile’’ to customers. On the anvil is a plan to provide limited mobility service (WLL); Rs 400 crore has already been earmarked for the project. Says R Gopalakrishnan, executive director of Tata Sons: ‘‘The Tata group is changing. I think the future requires more distributed leadership and it requires a change in mindset.’’ (see interview alongside) BANKING ON THE OLD SIMULTANEOUSLY, officials are betting on major contributions from the trusted old economy majors as well. Says Tata Steel’s VP, finance, R C Nandrajog: ‘‘The Tata Group is poised for major strides in 2003. Tata Engineering is completely out of trouble, TCS, Tata Chemicals and Tata Power are doing remarkably well. ’’ The Tata group is reaping the results of some major restructuring in companies like Tata Steel and Tata Engineering. For Tata Steel which, till recently, was struggling under the impact of the slowdown, the bottomline has once again begun to show lustre. The company is now the lowest cost steel producer. Says Nandrajog: ‘‘We are now aiming to be the lowest cost producer even in actual costs.’’ The other unlikely success story is in the form of Tata’s pet project, the small car, Indica. After initial hiccups, Indica is cruising successfully, and has retained its leadership in the B segment. The Indica has now been followed up by the mid-sized Indigo, which was unveiled with an aggressive pricing strategy (starting at Rs 4.38 lakh) earlier this month. At the launch, Tata said that while Tata Engineering may not be competing with the global car majors, it aimed to provide value to the Indian consumer. Indian Hotels, the group’s hotels flagship, continues to restructure and renovate, with the iconic Taj Mahal Hotel, Mumbai, celebrating its centenary this year with great fanfare. Properties already completed have reported a rise in revenues, a good situation which promises to get better. Tata Tea and Tata Power are also faring well, with the latter having just undergone a change of guard: Firdose Vandrevala has taken over recently as managing director. Insiders say the Group’s major challenge is to make the Tata brand global in the true sense. ‘‘Besides increasing its global presence, the Group is refocusing on its strategic areas to take it forward,’’ says an official. To this end, the Group will have to benchmark itself in terms of cost competitiveness against the best in the world. ‘‘This is very important if the group wants to expand in the new global markets,’’ says a senior group official. AFTER RATAN, WHO? THE numero uno question is: Who will succeed Ratan Tata five years later. Tata has made it clear he’d like someone who upholds the values the Group stands for. The name of Noel Tata, Ratan Tata’s step-brother and head of Trent Ltd, has been doing the rounds as his successor for a while now. However, Noel is still not on the board of Tata Sons, and a kind of ‘training period’ may be required for him to be groomed before he is considered for the top slot. Ratan Tata himself is not unveiling his successor just yet, and top Group officials say there’s no hurry, since the powerful Group Executive Office (GEO), comprising the top managers, is the crucial-decision making body of the Group. With Group finance boss Ishaat Hussain, Gopalakrishnan, Chaukar and Tata himself sitting on the GEO, there’s really little need for a full-time top boss right now. But the GEO, senior Group officials say, will be expanded shortly, so that more top managers can get a bird’s eye view of the group’s various businesses. LOOKING BACK As Tata hangs up his executive boots, he will, certainly, look back with satisfaction at his stint. While stocks of top group companies may seem to have lost value over a five-year span, they have fared well over the past year, even as the Group’s fortunes showed signs of an overall turnaround. However, there may be a couple of areas which Ratan Tata would rather not have encountered. One clearly pertains to his inter-personal relations with some of the group’s top honchos, notably former Tata Steel boss Russi Mody, Kerkar and former Tata Finance managing director Dilip Pendse, with whom the group is currently embroiled in a messy legal battle. On the other hand, some fingers have been pointed to the Group in the area of good governance, notably in the Tata Finance case and in the VSNL-Tata Teleservices affair. Tata was also pretty open about corporate rivalries playing their part against his Group in the run-up to December 28. But all that looks insignificant pitted against the projected future of a group whose essential character is changing from an old-world, stodgy conglomerate to a nimble empire equally at ease with the old and new economies. With TCS, Tata Tele, Tata Steel and Tata Engineering all showing signs of moving ahead confidently, Ratan Tata can justifiably claim to have left an indelible impression on one of India’s most important industrial groups. (With Maithreyi Seetharaman)
