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Ratan Tata, seen here in 2016, transformed one of India's oldest business houses into a global powerhouse
Ratan Tata, philanthropist and former chairman of the Tata Group, who has died aged 86, was instrumental in the globalization and modernization of one of India's oldest companies.
His ability to take bold and daring business risks informed a high-profile acquisition strategy that kept the salt-to-steel conglomerate founded 155 years ago by his forefathers alive after the liberalization of the Indian economy in the 1990s.
At the turn of the millennium, Tata made the largest cross-border acquisition in Indian corporate history: the purchase of Tetley Tea, the world's second-largest tea bag producer. The iconic British brand was three times larger than the small Tata group company that bought it.
Over the next few years his ambitions only grew, as his group gobbled up major British industrial giants like steelmaker Corus and luxury car maker Jaguar Land Rover.
Although these acquisitions did not always pay off – Corus was acquired at very high valuations just before the 2007 global financial crisis and remained a drag on Tata Steel's performance for years – they were major moves. wingspan.
They also had a great symbolic effect, says Mircea Raianu, historian and author of Tata: The Global Corporation That Built Indian Capitalism. He adds that they “represented 'the empire strikes back' as a company from a former colony took over the valuable assets of the mother country, reversing the sneering attitude with which British industrialists viewed the Tata group a century earlier”.
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Tata is present in 100 countries and notably owns the largest steelworks in the United Kingdom in Port Talbot.
Global ambitions
The Tata group's prospects were from the start “outward-looking”, according to Andrea Goldstein, an economist who published a study in 2008 on the internationalization of Indian companies, with a particular focus on Tata.
As early as the 1950s, Tata companies operated with foreign partners.
But Ratan Tata was keen to “internationalize in leaps and bounds, not in symbolic, incremental steps,” Ms. Goldstein emphasized.
His unconventional training in architecture and his privileged view of his family group's businesses may have played a role in his approach to expansion, Mr. Raianu says. But it was the “structural transformation of the group” that he led that allowed him to realize his vision of a global presence.
Tata faced an exceptional corporate battle at Bombay House, the group's headquarters, when he took over as chairman of Tata Sons in 1991 – an appointment that coincided with India's decision to open its economy.
He began centralizing increasingly decentralized and domestically focused operations by opening the door to a series of “satraps” (a Persian term for an imperial governor) at Tata Steel, Tata Motors and the Taj hotel group who ran operations with little corporate oversight. the holding company.
This allowed him not only to surround himself with people who could help him implement his global vision, but also to prevent the Tata group – until now protected from foreign competition – from sinking into irrelevance. as India opened up.
Both at Tata Sons, the holding company, and in some individual groups within it, he has appointed foreigners, non-resident Indians and executives with contacts and networks across the world to the management team.
He also established the Group Corporate Center (GCC) to provide strategic direction to group companies. He provided “advisory support on mergers and acquisitions, helped group companies raise capital, and assessed whether the target company would align with Tata's values,” wrote researchers at the Indian Institute of Management. Bangalore in a 2016 article.
The GCC also helped Tata Motors raise funds for high-profile buyouts like Jaguar Land Rover, which radically changed the global perception of a company that was essentially a tractor manufacturer.
“The JLR takeover was widely seen as 'revenge' against Ford, which had derisively refused to acquire Tata Motors in the early 1990s and was subsequently soundly beaten by Tata Motors. Taken together, these acquisitions suggest that Indian companies had 'arrived' on the global stage just as growth rates were accelerating and liberalization reforms were bearing fruit,” says Raianu.
Today, the $128 billion group operates in 100 countries and a substantial portion of its total revenue comes from outside India.
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The Tata Nano, presented as the cheapest car in the world, was a failure
The failures
While the Tata Group made significant progress overseas in the early 2000s, domestically the failure of the Tata Nano – launched and marketed as the world's cheapest car – was a setback for Tata .
It was his most ambitious project, but this time he had clearly misread the Indian consumer market.
Branding experts say an aspirational India did not want to associate itself with the cheap car tag. And Tata himself finally admitted that the “poor man's car” label was a “stigma” that needed to be undone.
He thought there might be a resurrection of his product, but the Tata Nano was eventually discontinued after sales fell year on year.
Succession within the Tata group has also become a thorny issue.
Mr. Tata remained far too involved in the management of the conglomerate after his retirement in 2012, through the “back door” of the Tata Trust which holds two-thirds of the shares of Tata Sons, the holding company, experts believe.
“Without attributing responsibility to Ratan Tata, his involvement in the succession conflict with (Cyrus) Mistry has undoubtedly tarnished the image of the group,” said Mr. Rainu.
Mistry, who died in a car accident in 2022, was ousted as Tata chairman in 2016 following a boardroom coup that sparked a long legal battle that the Tatas finally won.
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Tata's acquisition of Jaguar and other foreign brands was seen as proof that Indian companies had arrived on the global stage.
A lasting legacy
Despite many wrong turns, Tata retired in 2012, leaving the vast empire he inherited in a much stronger position, both domestically and internationally.
Alongside significant acquisitions, his attempt to modernize the group with a focus on IT has served the group well over the years.
When many of his big bets went wrong, a high-performing company, Tata Consultancy Services (TCS), along with JLR, carried the “dead weight of other struggling companies”, Mr Raianu says.
TCS is today India's largest IT services company and the cash cow of the Tata Group, contributing three-quarters of its revenue.
In 2022, the Tata Group also brought back India's flagship airline Air India into its fold, around 69 years after the government took control of the airline. It was a dream come true for Ratan Tata, himself a trained pilot, but also a bold gamble given the capital intensity of running an airline.
But the Tatas appear to be in a stronger position than ever to take bold bets on everything from airlines to semiconductor manufacturing.
India, under the leadership of Prime Minister Narendra Modi, appears to have clearly adopted an industrial policy of creating “national champions” through which a few large conglomerates are built and promoted in order to achieve rapid economic results that spread to all priority sectors.
Alongside newer industrial groups like Adani, the deck is clearly stacked in favor of the Tata group to benefit.
