2 TABLE OF CONTENTS

FOREWORD ...... 4 PROLOGUE ...... 5

CROWN JEWELS ...... 6

TCS provided wings to Tata’s dreams ...... 6

Stumbling along in Euro pe, Tata Steel reaches a crossroads ...... 7

JLR’s success masks Tata Motors failure ...... 8

Global expansion to charge up Tata Power ...... 10

LIFE AND TIMES OF RATAN TATA ...... 12

His dot balls ...... 12

His run-ins ...... 13

Global score: 50-50 ...... 14

Small Gems ...... 15

Innovations ...... 17

The making of Tata’s A team ...... 18

Tata in two minutes ...... 19

FROM CLOSE QUARTERS ...... 21

Rahul Bajaj ...... 21

Lord Kumar Bhattacharya ...... 21

Tarun Khanna ...... 22

Adi Godrej ...... 22

EPILOGUE ...... 23

3 FOREWORD An Illustrious Career Ratan Tata has achieved change and success, with dignity

BUSINESS STANDARD / DEC 28, 2012 shareholding and asset acquisition drives. But even without TCS, the group’s performance under Ratan Tata hink back to 1991. The 87-year-old J R D Tata had has been impressive, though growth in market been Tata chairman for more than half a century. capitalisation (without TCS, which was listed only in With the group’s leading companies managed by 2004) has been below par at an annual rate of 10.8 per Tsimilarly ageing satraps, the last thing the Tata name cent. The return on capital employed too has taken a dip, stood for was vibrancy and energy; the more usual from 15.2 per cent in 1992 to 14.4 per cent even with adjectives were staid and unenterprising. That was TCS — reflecting the under-performance of some of the when a relatively young Ratan Tata (53) was named the overseas assets, and the fact that an on-again-off-again new group chairman, provoking questions about his Tata Motors has by far the lowest price-earnings multiple track record (undistinguished) and therefore capability, in the auto industry. quite apart from acceptability. Those questions got It is also important to note the personal dignity with answered long ago, though acceptability was acquired which Ratan Tata has conducted himself throughout these only by hoofing out some superannuated recalcitrants. two dynamic and often tumultuous decades, and to Two decades later, as a 75-year-old Ratan Tata prepares recognise that he long ago became the doyen of Indian to step down today, the Tata brand stands for vibrancy industry. Elegantly attired, and moving at ease among the and energy, innovation and even daring (pace its over- world’s business leaders, Mr Tata has also acquired global the-top bids for overseas assets), and still doing business standing for himself and his group — becoming, for the Tata way. Equally important, as Mr Tata hands over instance, the largest private employer in the UK. Some the reins to 44-year-old Cyrus Mistry, most group would question his endorsement of Narendra Modi when company CEOs are men (yes, no women unfortunately) the Tata Nano project moved to Gujarat, others would in their 40s, with the companies themselves held point to the scandal at Tata Finance (led at the time by together more tightly through shareholding and brand someone who had worked closely with Mr Tata), and discipline. As Rahul Bajaj said, Ratan Tata has changed many will remember Niira Radia and her desperate the group’s DNA — almost entirely for the better. attempts to influence the choice of telecom minister in The group itself is 18 times bigger than in 1991, if 2009. Mr Tata has also had his run-ins with the media, counted in US dollars; in rupees, it is 51 times bigger, and more than once denying words attributed to him, being compares well with the rest of corporate India, which it excessively sensitive about criticism, and blacklisting one dominates in all rankings. The growth numbers for profits large media house after the other when it came to group are similarly impressive. Both have been helped by the advertising. But these are minor aspects of an illustrious stellar performance of Tata Consultancy Services ( TCS), business career that in the end has more than vindicated which remains the country’s largest software services firm. JRD’s choice of successor in 1991, and which leaves the TCS also bankrolled much of the increased intra-group Tata name shining brighter than the others.

4 PROLOGUE Life begins at 75 He may no longer be steering India's largest conglomerate, but make no mistake - Ratan Tata will have his hands full in his second innings, too

SHYAMAL MAJUMDAR / DEC 28, 2012 That’s a long enough list. But does it mean he would cut himself off completely from all that is remotely itoo and Tango must be eagerly looking forward to considered commercial in nature? The answer is a big No. tomorrow morning. Reason: their master, who works Just like JRD, he would remain Chairman Emeritus of 16 hours a day and often flies between four countries Tata Sons and several group companies – an ornamental Tin a week, would finally be able to spend more time with position — but one which gives him the moral authority them after he retires from Tata Sons this evening. to give advice if asked for by the new Chairman. Tata But the two German Shepherds may be in for himself has made it clear that he would be available to disappointment. While he would surely stick to his words anyone seeking his advice but would refrain from taking of not allowing his “shadow to hang over Bombay House any active role in the running of the group’s businesses. like a ghost walking the corridors,” it’s also equally certain Going by the extraordinary closeness he shares with that Ratan Tata, 75, would not slow down his pace and be Cyrus Mistry, the latter wouldn’t be miser in seeking his happy watching the seagulls on the Arabian Sea, which is counsel. The advice would certainly be much more just 40 meters away from his apartment in Colaba. frequent in matters relating to Tata Motors. The company, Unlike his predecessor, JRD Tata, who in 1991 handed which is clearly closest to Tata’s heart, is suddenly feeling over to him the chairmanship of Tata Sons as well as the pressure from newer competitors like Mahindra & control of the trusts, Ratan will continue to retain control Mahindra because of an indifferent performance in of the latter. Significantly, there is no retirement age at domestic markets. Tata has also made no secret of his the trusts, which together control around 66 per cent of desire to remain involved with the Nano. the shares of Tata Sons. Going by his public statements, Tata would obviously But what will keep Tata really busy in his new office at try to reverse that even after he retires as he has himself Elphinstone Building (a new elevator has just been said he would love to be “involved” rather than think this installed in the building, which is just a few blocks away is the level that Nano sales can be. from Bombay House), are his mega plans for the trusts, And then there is the buzz about Tata planning to set which were so far attracting only half his attention. The up an international centre with state-of-the-art facilities to first indication of that came in his acceptance speech for a design a wide range of products. The design centre would Lifetime Achievement Award instituted by the Rockefeller be quite close to his heart as Tata has said quite a few Foundation when he said his “life’s work isn’t done yet” as times that the one benefit of studying in the School of he hasn’t been able to touch as many people at the bottom Architecture was that it taught him to doodle when bored. of the pyramid. He said board meetings were one place he would get Tata clearly believes “patchwork bored – that compulsion, thankfully, has just got over. philanthropy” — giving a bit of cloth here All this is quite a handful for people much younger in and food there — would not go far. So he age and in the prime of their working life. But Tata had moved away quite early from a would do more. For example, he has already said he benefactor-dependent model from a would like to attend the annual general meetings of partnership model. The second part of that Tata group companies as a shareholder and ask drive would come now as Tata doesn’t share questions. the common belief that charitable institutions Besides, Tata will continue to be on the board of have to operate on a shoestring budget directors of Alcoa, apart from being on the and does not need to create a international advisory boards of Mitsubishi, professionally-run corporate body. the American International Group, JP In a recent interview to American Morgan Chase, Rolls Royce, Temasek television journalist Charlie Rose, Holdings and the Monetary Authority Tata laid out at least a part of his of Singapore. He is also on the board action plan. He said he would of trustees of Cornell University and focus on rural development, the University of Southern California. conservation of water and his Clearly, his two canine friends most visible goal is to do would continue to have a difficult something in nutrition in time in getting Ratan Tata’s children and pregnant mothers. attention.

5 CROWN JEWELS TCS provided wings to Tata’s dreams Just four companies account for 85% of the Tata Group turnover. This isthe first of a four-part series on these crown jewels of the Tata empire

KRISHNA KANT / DEC 24, 2012 TATA SONS: HOW IT EARNED AND SPENT (Rs crore) Year Dividend* TCS Shares sale ** Borrowings Investments part from his vision, what FY05 445.2 2800.0 0.0 3241.1 helped Ratan Tata pursue his FY06 540.6 835.9 178.5 1640.7 global dreams was the FY07 753.7 696.6 1802.6 2610.6 pAhenomenal success of Tata FY08 740.7 3873.8 4662.5 9111.5 Consultancy Services, which is 74 FY09 1019.2 892.5 1969.2 5772.9 per cent owned by Tata Sons. FY10 1226.9 0.0 361.3 3032.7 Beginning with its initial public FY11 2886.8 0.0 1661.9 4712.8 offering in August 2004, which FY12 2453.8 0.0 446.3 2451.3 helped Tata Sons raise around Rs * Dividend from TCS; ** Proceed from sale of TCS shares including IPO Source: Capitaline, BS Estimates 2,800 crore, TCS indirectly funded the bulk of investments by Tata Sons in key group companies as they went Tata Sons’ holding in all listed group of its chairman. The holding out to conquer the world. The companies is currently valued at company has smartly leveraged the numbers speak for themselves. Since around Rs 2.4 lakh crore. future cash flows from TCS (as 2004, Tata Sons has invested Rs TCS has a policy to distribute 30- dividends) to borrow and support 34,000 crore in various group 50 per cent of net profit as dividends, various group growth plans. companies, including unlisted in four quarterly pay-outs. In FY10, A consistent financial ventures. During the period, Tata however, it distributed 55 per cent of performance by TCS and its high Sons earned around Rs 10,000 crore consolidated net profit and 70 per market valuation enabled Tata Sons as dividend from TCS; another Rs cent of its standalone net profit as to act as the investor and lender of 9100 crore was raised by selling TCS equity dividend, by way of a special last resort to group companies. For shares (including IPO). A further Rs dividend. example, when Tata Motors’ Rs 11,500 crore came from borrowings Ratings agencies recognise the 4,145-crore rights issue in October largely secured by pledging shares of power of TCS, which, they say, plays 2008 devolved on promoters and TCS, the group’s most valuable a significant role in Tata Sons Indian Hotels Company’s rights company. enjoying AAA ratings, helping it to issue in 2008 received muted So, if not for TCS, Tata might have borrow at the lowest possible rate of response from retail and had to either scale down his global interest. “The ratings reflect Tata institutional investors. ambitions or the funding cost of big- Sons’ exceptional financial flexibility TCS also enabled Tata to see new ticket global acquisitions would have which arises from its ability to raise businesses and nearly half of the stretched the group’s balance sheet to additional funds by sale or pledge of Tata Sons portfolio is accounted for unsustainable levels. Investment TCS shares,” said CRISIL, while by its investment in unlisted bankers agree. “The majority control assigning top rating to Tata Sons’ subsidiaries. of TCS gives great financial firepower non-convertible debenture As of now, there is no sign of any to Tata Sons. The recurring cash from programme in November. slowdown in the TCS cash machine. TCS and the market value of TCS Icra holds a similar view. “AAA In the first half of the current year, provided Tata Sons the cushion to ratings incorporate Tata Sons’ strong net profit jumped 43 per cent, while absorb minor losses if the bet didn’t financial flexibility despite increase revenues were up by 36 per cent on work out in the short term,” said in the debt levels to support funding a consolidated basis. This has Dara Kalyaniwal, vice-president, requirement of its investee translated into handsome gains for investment banking, at Prabhudas companies,” said the agency. shareholders, including Tata Sons, Lilladher. He is not exaggerating. Tata The group’s globalisation drive which has already received Rs 3,175 Sons’stake in TCS is currently valued and its appetite for inorganic growth crore in the first six months, 30 per at around Rs 1.8 lakh crore, nearly have closely followed the rise of cent more than what it earned six per cent of which was pledged at TCS in the last 10 years. And, as during the whole of FY12. More will the end of September. In comparison, TCS got bigger, so did the ambition come in the last quarter.

6 Stumbling along in Europe, Tata Steel reaches a crossroads Tata Steel group’s fortunes have seesawed with steel prices, primarily because European operations accounting for 60% of revenues don’t have captive raw material resources

ISHITA AYAN DUTT / DEC 25, 2012 CHILL WINDS IN EUROPE Tata Steel’s Indian business is much healthier than its global operations t a dinner in Taj Chambers on FY12 CAGR (%) July 22, 1993, after a Rs Crore FY92 Consolidated Standalone Consolidated Standalone marathon annual general REVENUES 2,845.3 1,38,620.6 35,551.6 21.4 13.5 mAeeting of Tata Steel, Ratan Tata OPERATING PROFIT 584.7 17,351.7 12,934.2 18.5 16.7 asked B Muthuraman and T NET PROFIT 214.2 5,389.8 6,696.4 17.5 18.8 Mukherjee (senior general managers EQUITY DIVIDEND 80.6 11,65.46 1,165.5 14.3 14.3 then), “Would you let the bluest of NET WORTH 1,545.5 43,061.0 52,621.5 18.1 19.3 blue chip companies have a red ASSETS 3,596.8 1,02,857.9 78,793.8 18.3 16.7 bottom line?” The context of that MARKET CAPITALISATION 13,808.4 45,685.7 45,685.7 6.2 6.2 question was a miserable first ROCE (%) 11.7 12.5 15.0 quarter result in the backdrop of Source: Capitaline, BS Research competition from imports, signalling a transition to a buyer’s market. The question helped Tata, who 2006, that’s before Tata Steel was then new to his role of Tata Steel acquired Corus, the company chairman, extract a promise from the featured among the top four steel two gentlemen. Before the end of the makers in the world. But following financial year, the company would two financial crises that reverberated reduce cost by Rs 500 a tonne, which through the world, Tata Steel has slid translated to 7.5 per cent of the cost down the charts. A lot of it is linked at that point in time. Till then, every to its European operations. year, cost had actually gone up. Five years after the high profile By December, at a meeting that buyout of Corus — the biggest lasted till two in the morning, Tata foreign acquisition made by an Indian was told by a group of very satisfied company at $12 billion in those times executives that they had managed a business was subject to commodity — Tata Steel is at a crossroads. At cost reduction of Rs 350 a tonne. cycles and Tata Steel should diversify. 608 pence a share, the price was a 34 But Tata’s response was a clear It came as a rude jolt, but the per cent premium to Tata Steel’s expression of disappointment: “Your management took the cue. From original offer. Though the deal promise is with me, you don’t have to 1995 to 2001, Tata Steel reduced catapulted Tata Steel to the fifth make another promise. What is at workforce from 78,300 to 47,300 by largest steel maker, in hindsight, it stake is your prestige and reputation.” implementing a voluntary retirement looks like a costly deal. The message was, therefore, loud scheme ( VRS), and an early a costly de and clear: By March, costs were separation scheme ( ESS). At the The Tata Steel group’s fortunes brought down by Rs 500 a tonne executive level, Tata Steel introduced have seesawed with steel prices, even though there was an increase on the performance ethic programme. primarily because the European almost every other count, including Had the VRS not been introduced in operations that account for 60 per railway freight. Target-led innovation 1995, all its profits, especially in cent of revenues don’t have captive had made it possible. 2001-02, would have gone towards raw material resources, unlike its It was an achievement indeed, but payment of salaries. In short, Tata Indian operations. Together, coking towards the late 1990s, profitability Steel would have been in the red. coal and iron ore, account for about started suffering once again, But the company bounced back. In 65 per cent of the total cost of steel prompting Tata Steel to appoint three 2001, it topped the World Steel production. consultants— Booze Allen Hamilton, Dynamics (WSD) chart of world class Unsurprisingly, profitability has McKinsey and Arthur D’ Little. The steel makers against several slipped down the years. From a high report card: a grade ‘C’. parameters that included operating of Rs 12,322 crore at the end of Tata Steel was told in clear terms cost, technology, product quality, March 2008, Tata Steel’s consolidated that it was flabby and no good position in the domestic market. profit after tax stood at Rs 4,49 crore compared to global peers. McKinsey Small acquisitions — NatSteel and in 2009 and 2010 ended with a loss had even cautioned that the steel Millennium Steel — followed and till of Rs 2,121 crore. 2011 was better at

7 Rs 8,856 crore, but in 2012, it almost savings from synergies expected to be news for a company which now halved to Rs 4,949 crore. achieved over three years is not depends on Europe for 66 per cent of Raw materials, however, are still a known its total production capacity, part of the bigger problem. According Of course, some captive raw So, the focus obviously would be to some, Corus buys the Rolls-Royce material will flow in from to correct the imbalance and focus on of raw materials, but with that it is Riversdale. Tata Steel is expected to India to achieve business growth. The possible to achieve records in receive its first shipment of 850,000 Indian operations are on a steady technical parameters, not profits. It’s a tonnes of coking coal and 200,000 course, which is poised to better once combination of factors that’s affecting tonnes of thermal coal from these the steel plant at Kaliganagar is Tata Steel Europe, raw material apart, mines in Mozambique shortly. But commissioned in 2014, though the such as under-investment in plants by for its European operations that project is delayed by about five years erstwhile promoters, and high have a capacity of about 18 million and Tata Steel is almost sure to miss employee cost, though Tata Steel has tonnes yearly, it could just be a peck its target of achieving a capacity of 50 downsized significantly, and in the ocean. million tonnes by 2015. slowdown in Europe. The demand scenario for Corus Recently, Ratan Tata said in his There are issues with the doesn’t look quite bright either, at interview to the group’s in-house integration process as well. Ratan least in the near term. According to journal that his involvement in Tata Tata had recently said the earlier Tata Steel’s forecast, the European Steel’s growth and evolution has been British managers of Corus were not economy was expected to contract in significant. It looks like his successor ready to go the extra mile. Whether 2012, with only marginal growth will have a lot to straighten in the that has affected the $450 million predicted in 2013. That’s not good group flagship.

JLR’s success masks Tata Motors’ failure Company has been sliding in consumer offerings and performance at home

KRISHNA KANT & SWARAJ BAGGONKAR/ The acquisition of Jaguar Land shifting to its rivals. Fixing this will be DEC 26, 2012 Rover in 2008 catapulted Tata Motors top priority for Cyrus Mistry, the new to one of the world’s top car makers. chief, given the amount of financial atan Tata became the chairman It has also been an unqualified and strategic capital invested by Tata of Tata Motors in 1988, a full financial success. JLR accounts for Sons in the company over the years. three years before he took the nearly two-thirds of revenue and 90 According to the Society of Indian Rleadership mantle of Tata Sons. per cent of consolidated profit. It also Automobile Manufacturers ( Siam), Since then, the company has been a helped the company de-risk its Tata Motors’ market share in the canvas for Tata to give expression to finances from the vagaries of the passenger vehicle segment fell to 12.7 his aspirations. Be it India’s first commercial vehicle business. per cent during April-November 2012 indigenous car (Tata Indica), first The JLR success, however, masks from 16.4 per cent in 2006-07. It is SUV (Safari), first micro truck (Ace) Tata Motors’ failure to connect with India’s fourth largest passenger car or a Rs 1 lakh car for the common Indian car buyers, increasingly brand, after Maruti Suzuki, Mahindra citizen (Nano), Tata Motors has & Mahindra and Hyundai. many firsts to its credit. The slowing in its domestic business is a financial drag. During the 12 months ending September, the domestic business earned just 5.1 per cent operating profit against 12.5 per cent for its consolidated operations. The financial ratios of the domestic business are even worse, with a return on capital employed (RoCE) of just 3.3 per cent in FY12. Analysts, however, are not losing sleep over Tata’s apparent failure in the passenger car market. “At best, it accounts for five per cent of the company’s consolidated profit and its financial performance is linked to JLR, followed by its commercial vehicle business in India,” says the

8 automobile analyst at a leading A PIGGYBACK RIDE brokerage company. However, he Tata Motors is surfing on JLR success wave adds, success in the home market FY12 CAGR (%) matters in the longer term, as India is Rs Crore FY92 Consolidated Standalone Consolidated Standalone set to become one of the world’s top REVENUES 2824.6 168,852.0 55,504.5 22.7 16.1 car markets in 10-15 years. OPERATING PROFIT 420.4 22,141.5 4,166.4 21.9 12.2 NET PROFIT 136.6 13,516.5 1,242.2 25.8 11.7 COMPLACENCY EQUITY DIVIDEND 43.9 1,280.7 1,280.7 18.4 18.4 Experts say the company failed to NET WORTH 1032.0 28,817.9 14,091.2 18.1 14.0 build on initial successes. “Tata ASSETS 1787.8 89,136.0 38,187.8 21.6 16.5 Motors is an engineering powerhouse MARKET CAPITALISATION 6553.0 87,494.8 87,494.8 13.8 13.8 and most of its products have been ROCE (%) 7.6 15.2 3.3 segment builders. Indica was India’s Market capitalisation on the last trading day of each financial year Source: Capitaline, BS Research diesel hatchback, Sumo started the MPV (multipurpose vehicle) segment, while Safari pioneered SUVs in India stylish. The company’s portfolio hasn’t Maruti Zen and Hyundai Santro. The but the company failed to carry it changed much in 10 years, except new generation Indica Vista is up forward,” says Pradeep Saxena, routine product refreshments,” says against a dozen or more compact cars. executive director, TNS India. He an analyst. Others put the blame on The company needs a breakthrough finds a paradox here. “Brand Tata has the Nano failure; the vehicle product and not incremental model certain inherent values embodied in consumed resources and management changes as it has been doing all it, such as trust, fairness and integrity. bandwidth for years. “If the Nano had through,” says Pradeep of TNS India. The issue is whether these are good clicked and sold as per the company’s The company seems to agree. enough for the car category or a expectations, Tata Motors would have “There has certainly been a quiet buyer cares for another set of values been the number two car maker by period of late (in terms of new such as modernity, innovation and now,” says V G Ramakrishnan, product launches). However, there style,” he says. director of Frost & Sullivan. are new products and offerings in the The poor show in the domestic car The company’s innovation pipeline,” it says. market is recognised by the company, machine has slowed in recent years. Experts said it might take time but up to Ratan Tata himself. “Success in In the seven years from 1991 to the company had the means and the domestic passenger car market is 1998, Tata Motors launched five resources to make a strong comeback. non-negotiable for us. The goal is to distinct products — Tata Sierra, “JLR’s acquisition distracted the top become a strong number two in the Estate, Sumo, Safari and Indica. The management for a while but the near term, and eventually target for pace of new launches has domestic market will be its top priority the market leadership,” says the considerably slowed and in the past now. JLR’s success gives Tata Motors company’s spokesperson. 10 years, it launched just four new the financial muscle and the To achieve this, it will first need to products — Indica Vista, Indigo engineering prowess to adopt an fix Tata Motors’ brand image and then Manza, Nano and Aria, besides aggressive posture in India,” says the flood the market with new products. refreshing older models. auto analyst at a brokerage house here. “A product is a brand in the auto If the company succeeds, this will industry and Tata Motors’ product ACTION NEEDED be the best retirement gift from Cyrus line-up is neither exciting enough or “When the Indica was first launched Mistry and the company’s top come about as sophisticated and in 1998, it was competing against the management to Ratan Tata.

9 Global expansion to charge up Tata Power Tata Power finds itself in a financial storm, as its biggest investment, on the 4,000 Mw Mundra Ultra Mega Power Project didn’t go according to the script

ABHINEET KUMAR / DEC 27, 2012 investment, on the 4,000 Mw total investment in Mundra accounts Mundra Ultra Mega Power Project for nearly a third of the consolidated ata Power, the country’s largest (UMPP) didn’t go according to the assets. power utility in the private script. Scheduled to be fully When the company won the bid to sector, would like to forget operational by the middle of next develop the Mundra UMPP, to be 2T012. It had a loss for the first time year at a total cost of Rs 18,000 based on imported coal, this was in over two decades, quite a setback crore, it will nearly double Tata supposed to free Tata Power from the for a company which not so long Power’s generating capacity but is constraints of its regulated business ago was a key source of growth extracting a big financial cost. The that capped returns from its bread- capital for the entire group. It helped fund the acquisition of Tata FINANCIAL PERFORMANCE Communications and is a promoter FY12 CAGR 20 Yr (%) of the group’s telecom venture, Tata FY92 Consolidated Standalone Consolidated Standalone Teleservices. The company remains NET SALES 541.26 26152.89 8562.14 21.40 14.80 a heavy hitter in the group, with the OPERATING PROFIT 92.50 3368.98 2768.09 19.69 18.52 third largest balance sheet after Tata PAT 26.48 -1087.70 1169.73 Loss 20.85 Steel and Tata Motors. EQUITY DIVIDEND 4.10 296.92 296.92 23.88 23.88 Ratan Tata became the chairman NET WORTH 254.63 12810.79 11957.42 21.64 21.22 of Tata Power quite late, six years TOTAL ASSETS 963.24 60654.94 25218.99 23.01 17.73 after he became chairman of Tata MARKET CAPITALISATION 513.00 23932.71 23932.71 21.18 21.18 Sons in 1991. ROCE (%) 12.36 8.03 10.80 -- The company now finds itself in a Market capitalisation on the last trading day of each year Source: Capitaline, Compiled by BS Research Bureau financial storm, as its biggest

10 and butter-power distribution and generation business in the Mumbai region. The company was hoping to earn better returns from Mundra through economies of scale and energy-efficient super-critical technology. It had bid aggressively, promising to supply power at Rs 2.26 a unit. In comparison, NTPC, the country’s largest operator of coal- fired plants, sold power at an average of Rs 2.66 a unit in FY12. The government had envisaged imported coal-based power plants as domestic supply was not able to meet the demand. Tata Power’s calculations were based on plans to import coal from Indonesia when international prices were around $40 a tonne at the time of bidding in 2006. It then bought a 30 per cent equity stake in two major Indonesian thermal coal producers, KPC and PTA, in March 2007. But global coal prices surged past $100 a tonne in 2011 and the Indonesian government banned exports below the notified price from September “To an extent, Tata Power was 2011. This made import of coal aware of the risk it was taking on coal economically unviable for Tata Power prices, so it tried to mitigate it by and the Mundra project is now taking part-ownership of the mines,” unable to make even operational said Murtuza Arsiwalla, analyst at profit; it cannot service the project Kotak Institutional Equities. “But the debt on its own. extreme volatility of coal prices that Coastal Gujarat Power Ltd (CGPL), followed was completely the special purpose vehicle set up to unexpected.” implement the project, reported The setback at Mundra has, operating losses of Rs 2.3 crore on however, not deterred Tata Power’s revenues of Rs 363 crore in the growth plans or to go slow on quarter ending September. The total globalisation. It is aiming for 26,000 loss, including finance and Global rating agency Standard & Mw of generation capacity by 2020, depreciation cost, was Rs 461 crore. Poor’s has downgraded Tata Power’s by setting up more power plants in In comparison, the Tata Power long-term rating to BB-. This is a India and expanding abroad, to de- standalone business reported an speculative and non-investment risk itself from fuel shortages here. operating margin of 27 per cent in grade rating. “The outlook revision Its non-Mundra business, the last quarter. reflects our expectation that Tata however, continues to be healthy Power's cash flow and financial risk and are growing at a steady pace. PLEADING profile could deteriorate over the The company enjoys a strong AA- Cyrus Mistry, the new chairman of the next six to nine months because the rating for its domestic and group, now faces the challenge of company has breached a debt-to- rupee-denominated borrowing convincing Mundra customers – six equity ratio covenant on loans to its programmes, thanks to its regulated beneficiary state governments – to Mundra project," S&P credit analyst power generation and distribution agree to a price rise so that the Rajiv Vishwanathan said in a business. “The rating on Tata Power project becomes financially viable. statement this July. continues to reflect its strong CGPL is seeking intervention from the To mitigate the risk, the company business position as an integrated Central Electricity Regulatory has offered to restructure — it will power company. Its cash flows from Commission for an upward revision transfer 75 per cent of its equity core licensed operations are stable in rates to above Rs 3 a unit. “We are interest in Indonesian coal mines to due to the regulated nature of the hopeful of an early resolution of the CGPL, so that it uses the dividends business," said Amod Khanorkar, issue,” said Anil Sardana, managing from coal to service the debt in the analyst with CARE Ratings in a note director, Tata Power. interim period. last month.

11 LIFE AND TIMES OF RATAN TATA His dot balls Tata will surely feel good about many of his initiatives, but to upset rules regarding foreign there were a few missed opportunities as well equity contribution,” Kaw wrote. He said that CM Ibrahim, the then civil BHUPESH BHANDARI / DEC 28, 2012 commercial airline, Tata Airlines, in aviation minister, was not convinced the 1930s. After Independence, it was about the Tata proposal. “The n November 15, 2010, Ratan nationalided and renamed Air India. minister did not clear the file, despite Tata delivered a lecture on Though the Tata group was out of the several attempts on my part,” Kaw “India in the 21st century: airline, the business always remained added. The sector, of course, is mired oOpportunities and challenges” in close to its heart. In the 1990s, when in losses. It’s not sure if the stillborn Dehradun, the capital of the sector was opened up for private proposal was a blessing in disguise. Uttarakhand. The lecture would companies, Tata knew the time had Telecom is a different story. Tata have gone unnoticed, had Tata not come. He quickly put together an Teleservices has 76.7 million revealed that he thrice tried to get alliance with Singapore Airlines to subscribers (as of October 31, into civil aviation but his attempts start a domestic carrier. Then the according to the Telecom Regulatory were futile because a minister laws changed overnight. Foreign Authority of India), which puts it in demanded to be paid Rs 15 crore in airlines were barred from owning the fifth slot after Bharti Airtel (186.4 bribes and he refused to do so. even a single share in a domestic million), Vodafone (153.1 million), “We approached three prime carrier. Tata’s proposed airline with Reliance Communications (134 ministers also, but an individual Singapore Airlines never took off. million) and Idea Cellular (115.7 thwarted our efforts to form the Who stymied the plans? million). Tata Teleservices, in the early airline,” he said. “I did not want to go years had taken the CDMA route, and to bed knowing that I set up an THE RED MARKS not GSM, to mobile telephony. Though airline by paying Rs 15 crore.” This highly efficient for transmitting data,  Telecom companies are way behind the kicked up a storm. Some people CDMA suffered from some drawbacks. leaders; Tata Teleservices, with 76.7 urged Tata to name the minister, For example, the handset came million subscribers, ranks fifth given the strong anti-corruption bundled with the service. Two, a sentiment in the country. Others said  Domestic car business has failed to live up royalty had to be paid to Qualcomm, there was no point speaking out to the initial promise of two high-profile the service provider, which eroded the against the misdemeanor ten years launches (the Indica and Nano) profits. The future was with GSM. later. Yet, it was a rare admission of  Exited FMCG (Tomco and Lakme) and The window of opportunity to missed opportunities in Tata’s 20- missed the boom launch GSM service showed up in year-long career as the chairman of  Housing initiative yet to attain scale 2007 when the department of Tata Sons. telecommunications, under  As he takes stock, Tata will surely Pharmaceutical foray (Advinus) yet to get Andimuthu Raja, decided to allot feel good about many of his into the big league GSM spectrum to CDMA players at Rs initiatives: the transformation of Tata  Aviation plans just couldn’t take wings 1,659 crore for all of India. Things Steel and Tata Motors, growth of went awry for Tata Teleservices right TCS, expansion of Tata Tea et cetera. from the start. On the flip side, his domestic car Maharaj Kishen Kaw, a former On October 18, Raja, while business has failed to live up to the bureaucrat who was the civil aviation approving the sale of crossover initial promise of two high-profile secretary when Inder Kumar Gujral spectrum noted on the file that “for launches (the Indica and Nano), he was the prime minister (April 1997 to allocation of spectrum, the date of exited FMCG (Tomco and Lakme) March 1998), in his recent book, An payment of required fee should and missed the boom, his housing Outsider Everywhere: Revelations by determine the seniority”. Three initiative is yet to attain scale, his an Insider, has said that it was the CDMA service operators, Reliance pharmaceutical foray (Advinus) is yet handiwork of Tata’s rivals. “The Tatas Communications, Shyam Telelink and to get into the big league, his telecom had mooted a proposal for a private HFCL Infotel, had applied for GSM companies are way behind the airline with 40 per cent equity licence in 2006. In-principle approval leaders, and his aviation plans just contribution from Singapore Airlines. was granted to these three on couldn’t take wings. As this would have been a formidable October 18 itself, though the press JRD Tata had started India’s first competitor, Jet (Airways) tried hard release to this effect was only issued

12 the next day. On October 19, Reliance fee. Its applications were received at have willfully subverted policy under Communications deposited the fee of DoT’s reception counter and further various telecom ministers, which has Rs 1,645 crore (for 20 of the 22 delivered to the office of the wireless subsequently been regularized to telecom circles) and came right on advisor. Then, from there the their advantage. The same operators top of the queue for spectrum. applications went missing! continue to subvert policy, have even It was allotted spectrum on On December 8, 2010, Tata wrote paid the fee for spectrum even before January 10 and 11, 2008. Tata to Rajeev Chandraskehar, who had the announcement of policy and have Teleservices applied on October 20. accused of incorrectly grabbing ‘de facto ownership’ in several new Now, Raja decided to change the spectrum under the crossover telecom enterprises.” Tata policy and clubbed Tata Teleservices window: “The company (Tata Teleservices had not got spectrum in with other seekers of spectrum. He Teleservices) has strictly followed the Delhi and some other circles even gave in-principle approval to Tata applicable policy and has been three years after the announcement Teleservices’s proposal only on severely disadvantaged, as you are of the policy. Tata added. January 10, 2008, when the company well aware, by certain powerful In telecom, lobbying is everything. was required to deposit the licence politically connected operators who Tata and the run-ins A brief look at the slugfests that Ratan Tata never shied away from

MALINI BHUPTA / DEC 28, 2012 Kerkar at Indian Hotels and Nani Palkhivala at ACC – people who ran atan Naval Tata’s illustrious their companies without any career as the boss of Tata Sons interference. has seen many firsts: high- But Tata delivered a asterstroke dRecibel slugfests were one of them. — the Tata Sons board gave full Throughout his two-decade long support to his proposal for stint as chairman, Tata has never enforcing a rule that set 75 as the shied away from any adversary or retirement age for all Tata directors. adversity. Known to speak his mind, While this helped the exit of Seth, and that too publicly, he has had ill-health hastened Palkhivala’s many run-ins over the years with departure. Ajit Kerkar, who ceased peers in corporate India, politicians to be the executive chairman of and, of course, media. Indian Hotels when he turned 65, His critics say that Tata was not was of course turfed out for the one to forget things in a hurry, different reasons. and call him intolerant. It’s another matter that Tata Rajya Sabha member Rajeev himself again changed the Chandrasekhar says: “The Tata retirement rules to continue running group is caught between trying to the group as the non-executive maximize return on capital chairman for another 10 years. employed like any other business groups in India and remaining THE TELECOM TANGLE rooted to doing business that is Telecom has been one of the bitterest ethically comfortable”. battles that Tata has fought. By the Here’s a snapshot of some of his time the big boys – read Tata and most high-profile battles: Reliance – wanted to get into the business, upstarts were already doing BATTLING THE OLD GUARD well. From entering the fray to choice subscriber base, there was no way Soon after JRD Tata made him the of technology, Tata fought the GSM that Tata could have aspired for a chairman of Tata Industries in 1981, lobby tooth and nail. The public higher share of spectrum when four gentlemen decided they would slugfest started in 2006, when a compared to rivals. make life difficult for Ratan Tata. committee of the Department of So Tata wrote letters to J.S. Sarma, That is perhaps an understatement, Telecom announced its spectrum the then secretary, DoT, and Prime as what followed would have put allocation policy for new technologies Minister Manmohan Singh, even the worst palace intrigues to like 3G and Wimax. The policy stated suggesting that additional spectrum shame. The battle Tata faced was that telecom companies would get should be auctioned as it was a scarce from Russi Mody at Tata Steel, spectrum depending on the number resource. Darbari Seth at Tata Chemicals, Ajit of subscribers they had. With its Whether it’s the matter of out-of-

13 turn spectrum allocation or getting additional spectrum for free, most of these vexing issues have been raised by Tata at various points. Tata has also admitted that he had a "chemistry problem" with ex-telecom minister Dayandhi Maran.

LIGHTS OUT Like telecom, Tata has fought other business houses even in the power sector. And his bête noire in this sector is Anil-Ambani’s power companies. Whether it’s the battle for consumers in Mumbai or ultra mega power disappointments. The Nano project in THE TAPE MUDDLE projects, Tata has used the legal West Bengal, ended up as a disaster What really put Tata in the eye of system to fight rivals in this space. after the Tatas moved out of the state the storm were the leaked tapes that Reliance Infrastructure (erstwhile on October 3, 2008, after Mamata revealed conversations that his Reliance Energy) has accused Tata Banerjee’s Trinamool Congress lobbyist and owner of public Power of poaching its customers, started the Rs save farmland’ relations firm Vaishnavi while Tata Power sought payment of movement. Tata finally left Singur, Communications, Niira Radia, had dues built up over the years. but not before a public disapproval of with journalists and government Tata Power has gone to court on the agitation led by Banerjee. Though officials. After the tapes caused a the issue of surplus coal by Reliance the court battle over compensation national furore, Tata said that the Power from the captive mines that for the Singur land continues, the leaks were to create a smokescreen came with the UMPP. two protagonists have subsequently around the 2G controversy. He also sought to mend their fractured moved the Supreme Court, THE SINGUR CAULDRON relationship through conciliatory questioning the disclosure of private This clearly was one of his biggest tones in their public statements. conversations. Tata’s global score: 50-50 A blow-by-blow account on the hits and misses on Ratan’s acquisition trysts beyond India

JOYDEEP GHOSH & ABHINEET KUMAR / global operations contributed as Hussain, non-executive director of DEC 28, 2012 much as 58 per cent of the $100 Tata Sons, in response to a story in billion (Rs 4.75 lakh crore) group’s the Economist, recognised Tata Steel’s t took Ratan Tata a full decade to consolidated revenues in 2011-12. problems: “The Return on capital take the group global. But it was For Tata Steel, the share of global employed ( RoCE) since 2010 has the proverbial lull before the operations is as much as 74 per cent; been highly distorted by the sItorm as what followed was some of for Tata Global, it is 70 per cent; for performance of one business: Tata the most audacious deals that Tata Motors, it is 67 per cent and for Steel. The RoCE for Tata companies, corporate India had seen till they Indian Hotels, it is 25.77 per cent. excluding Tata Steel Europe and the happened. A snapshot of the companies, capital work-in-progress of Tata Steel The group became bolder as well – which have gone global, reflect a in India, is 14 per cent.” Tetley was acquired for $450 million; mixed picture. The return on Clearly, a 4 per cent drag on the JLR for $2.3 billion and Corus for networth (RoNW or return on equity) overall group’s RoCE cannot be taken $12.1 billion. for Tata Global at 8 per cent is more lightly. “I would put Tata in the larger or less same at the time of acquiring Though the financial sector crisis group of ‘globalising’companies, that Tetley and now. In case of JLR, it has since 2008 has led to slowing down is, ones that have an international shot up from negative to a whopping of demand from automobile and presence but still have not made their 52 per cent. For Indian Hotels, construction companies – the key presence felt everywhere in the however, it has declined from 14 per customers of Corus — many say that world. Tata is strong in Britain, the cent to less than a percentage point. the deal was expensive. Here’s why. US and South Africa, but less high- And Tata Steel’s RoNW has declined Lakshmi Mittal’s $34 billion profile elsewhere,” says Morgen from 37 per cent to 7 per cent. (See acquisition of Arcelor in June 2006 Witzel, author of Tata: the Evolution Mixed results) was cheaper at EBITDA (earnings of a Corporate Brand. In fact, Tata Steel Europe is before interest, tax, depreciation and In terms of sheer numbers, its hurting the group badly. Even Ishat amortisation) multiple of 4.3 vis-à-vis

14 9 for Tata Steel’s acquisition of Corus. COMPARISON OF KEY NUMBERS: FROM ACQUISITION YEAR TO 2011-12 That is reflected in the Company Marquee Net Net Market Debt-equity Return on performance of the share price. When acquisition sales profit cap ratio net worth % the deal was announced on June 30, TATA Tetley (2000-01)* 3,015.19 103.48 952.65 1.53 8.02 2006, Tata Steel’s share price stood at GLOBAL 2011-12 6,631.16 431.91 6,929.17 0.18 8.14 Rs 473 and market cap at Rs 29,516 TATA Corus (2007-08) 131,498.03 12,321.76 50,640.15 1.57 32.76 crore. In November 2012, the STEEL 2011-12 132,899.70 4,948.52 45,685.72 1.49 6.85 respective figures are Rs 377 and Rs 37,431 crore. The equity base, TATA JLR (2008-09) 70,880.95 -2,465.00 9,268.32 3.03 0.00 however, has increased substantially. MOTORS 2011-2012 165,654.48 13,573.91 87,494.77 1.52 51.57 To fund the deal, the group issued INDIAN Pierre (2005-06) 1,837.31 263.17 7,689.55 0.96 14.16 390 million shares, increasing the HOTELS 2011-12 3,432.71 25.82 4,849.41 1.17 0.73 equity base from 580 million to 970 Consolidated figures in Rs Crore; *While Tetley was acquired in 2000, the consolidated data is available only from 2001; million. During the same period, the Source Capitaline; Compiled by BS Research Bureau Sensex went up 82 per cent whereas the company’s stock price is down 20 completely different story, though the numbers continue to be stable. per cent. there were initial hiccups which forced Indian Hotels has suffered the The value of the acquisition has Tata Motors to post a loss of Rs 2,465 brunt of a lacklustre world economy. eroded considerably. If one considers crore in 2008-09. But now, the “The international acquisitions done peers like Arcelor Mittal, which marquee car company is the crown by Indian hotels have not been operate in a similar environment, jewel of the group. In fact, if JLR had earnings per share accretive due to their market cap stands at $26 billion. not paid a dividend of Rs 1,312 crore economic slowdown leading to lower Tata Steel, Europe which has one-fifth to Tata Motors in the second quarter of passenger traffic,” said Rashesh Shah, of Arcelor Mittal’s capacity should be the current financial year, the parent analyst with ICICI Securities. With the valued at $5 billion. In other words, company would have declared a loss. company willing to go aggressive the market value of Tata Steel is Within these two giant deals, there with the Orient Express deal, the lesser than the debt ($6 billion) it is Tetley which has done quite well. results will only show in 10-20 years, raised, and half the total price paid at Witzel says, “The Tetley acquisition say analysts. The numbers, as a $12.1 billion. Even capacity seems to have gone very well, partly result, are not very flattering. utilisation has fallen to 14 million because Tata Beverages has taken a While the jury is still out on how tonne in FY 11-12 from 23.1 million soft approach to managing it. Most Tata has done in his global ventures, tonne in FY 07-08. people in the UK still don't know that the fact is they have been bold, but JLR, on the other hand, is a it is owned by Tata Beverages.” And not necessarily beautiful.

position themselves as an organisation of repute on the global stage. Tata’s little gems It is also from among these very How the small companies in Tata's kitty have contributed to sectors that the Tatas' first major the growth of the conglomerate international acquisition happened. The year was 2000 and the VIVEAT SUSAN PINTO & respectively in the same time frame. acquisition was Tetley, a company SAMEER MULGAONKAR / While the four companies three times the size of TGB then MUMBAI DECEMBER 28, 2012, 15:38 IST contributed just about 7% to the called Tata Tea, with a 7% share of total turnover of the Tata Group in the world tea market and ranked rent, Tata Global Beverages the 2011-12 financial year, analysts number two after Unilever's Brooke- (TGB) may not be big say this number could go up as Bond-Lipton. TGB was a local player contributors to the Tata kitty, these businesses ride the then largely known for tea and coffee bTut are still significant to its growth consumption boom. production. Its branded play was story. Trent, Tata Global Beverages Group observers say that the fab hardly significant beyond Indian (TGB), Titan Industries and Tata four have actually helped the over shores though the company did have Chemicals have together grown at a 100-year-old Tata conglomerate mark a joint venture with Tetley for export compounded annual growth rate of its presence in sunrise sectors such as of its products. But it needed a strong 23% in the last six years. They fast-moving consumer goods (FMCG), platform to launch itself on the global continue to be the rising stars in the retail, agri, bio and nano technology. stage. That opportunity came with group with each clocking double- It is these sectors amongst its other the Rs 1,500-crore leveraged buyout digit topline growth. Tata Chemicals staple categories of information of Tetley, the largest cross-border grew at a CAGR of close to 23% in technology, automotive, hospitality, acquisition for an Indian company. the last six years. Trent, Titan and power and steel that the Tatas are When making the announcement TGB grew by 30%, 35% and 13% increasingly counting on as they in February of 2000, chairman Ratan

15 6 YEAR CAGR GROWTH RATE CONSOLIDATED FIGURES IN RS CRORE (in % for FY11-12) Net Sales Net Profit Year End Net Sales % chg Net Profit % chg TITAN INDUSTRIES 34.90 39.70 TRENT LTD TRENT 29.99 Loss FY05-06 403.47 72.14 28.94 46.90 TATA CHEMICALS 22.97 15.92 FY06-07 609.36 51.03 35.04 21.08 TATA GLOBAL BEVERAGES 13.47 5.56 FY07-08 718.01 17.83 34.04 -2.85 TOTAL * 23.11 15.57 FY08-09 849.73 18.35 0.22 -99.35 * Consoildated growth Rate for 4 companies FY09-10 1105.36 30.08 1.46 563.64 FY10-11 1591.72 44.00 2.52 72.60 % SHARE OF THE TATA GROUP# FY11-12 1946.28 22.28 -46.42 - (in %) Net Sales Net Profit CAGR (6 Year) 29.99 - TATA CHEMICALS 3.13 3.53 TATA CHEMICALS LTD TITAN INDS. 2.01 2.04 FY05-06 3992.80 - 428.34 - TATA GLOBAL 1.51 1.46 FY06-07 5763.34 44.34 508.04 18.61 TRENT 0.44 -0.16 FY07-08 5982.05 3.79 964.40 89.83 TOTAL 7.09 6.87 FY08-09 12651.98 111.50 759.81 -21.21 % SHARE IN THE MARKET CAP TATA GROUP# FY09-10 9448.68 -25.32 723.58 -4.77 As on Dec14, 2012 Mcap (Rs Cr) % shares FY10-11 11060.58 17.06 846.04 16.92 FY11-12 13806.06 24.82 1039.51 22.87 TITAN INDS 25626.35 5.34 CAGR (6 Year) 22.97 15.92 TATA GLOBAL 10416.95 2.17 TATA CHEMICALS 8586.69 1.79 TATA GLOBAL BEVERAGES LTD TRENT 3982.45 0.83 FY05-06 3106.52 2.14 312.24 35.96 TOTAL 48612.43 10.12 FY06-07 4024.89 29.56 475.95 52.43 # Filtered for listed companies FY07-08 4309.64 7.07 1934.75 306.50 Source Capiatline Compiled by BS research Bureau FY08-09 4847.87 12.49 831.90 -57.00 FY09-10 5782.95 19.29 393.31 -52.72 FY10-11 6003.17 3.81 292.04 -25.75 Tata had famously said, "It is a bold FY11-12 6631.16 10.46 431.91 47.89 move and I hope that other Indian CAGR (6 Year) 13.47 5.56 corporates will follow." TITAN INDUSTRIES LTD They did. But more so it gave the FY05-06 1468.36 32.01 80.93 286.67 Tatas the courage to take on even FY06-07 2135.88 45.46 99.86 23.39 bigger risks. That is, acquire more FY07-08 3053.98 42.98 147.56 47.77 businesses across sectors. In FY08-09 3911.01 28.06 163.92 11.09 beverages alone in the last decade, FY09-10 4779.13 22.20 251.30 53.31 TGB has wrapped up a string of buys FY10-11 6533.14 36.70 433.13 72.36 including Good Earth and Eight O' FY11-12 8848.43 35.44 601.50 38.87 Clock Coffee in the US, Jemca in the CAGR (6 Year) 34.90 39.70 Czech Republic and Grand in Russia. Data Source Capitaline Compiled by BS Research Bureau The company retains its appetite for more, but now says that it would like to focus on consolidation and Tatas and the Tamil Nadu Industrial In the last few years, Titan has organic growth. "We are a natural Development Corporation (TIDCO) in devoted its attention to other beverages company and our focus 1984, the company has in the last businesses too such as jewellery will be on tea, coffee and water," three decades positioned itself not under Tanishq, which gives it over Harish Bhat, managing director, TGB, only as a leading maker of watches in 70% of its revenues today, and eye- had said in a recent conversation India, but also amongst the top in the wear, a new area it ventured into with Business Standard. world. It is currently eying the besides leather accessories such as The company is open to striking number three position - a jump two wallets, belts and bags, as it looks to more alliances with like-minded places from number five, where it take advantage of India's partners if required - it has two at the stands globally in the watch market. consumption and retail boom. Titan's moment, one with PepsiCo, the other In India, Titan accounts for about managing director Bhaskar Bhat has with Starbucks - and is keen to up its 25% of the volume and 40% of the said that the company will continue revenues from coffee and water. value of the over 50-million-unit- looking at all lifestyle categories But TGB is not the only company watch market. barring apparels. where Tata's global ambitions have It has also created some enduring While Titan's growth has been played out ahead of other entities in brands such as Fastrack for youth, largely driven by organic measures, the group. Raga for women, Nebula, a gold it has wrapped up a few buys such Titan is another case in point. Set- watch targeted at the premium end as the acquisition of the Swiss up as a joint venture between the and Sonata at the lower end. heritage brand Favre-Leuba last

16 year. Speculation was rife in July infrastructure. Both Trent and Tesco core bulk & specialty chemicals and this year that it was contemplating a are now believed to be exploring the cement, while farm essentials dwell $1-billion or over Rs 5,000-crore possibility of expanding their on crop nutrition & protection and acquisition of Canada-based luxury alliance in the wake of parliament's seeds. Company executives say that watches and jewellery retailer Harry nod to retail FDI, say sources. the transformation from a Winston. But this was denied by the Tata Chemicals, in contrast, has commodity company to one company. expanded into three areas: living providing complex solutions in On Trent, the government's move essentials, industry essentials and different areas was led by the need to permit foreign direct investment farm essentials - from a producer of to be relevant in changing times. In in retail has opened up prospects for largely inorganic chemicals such as the last few years, Tata Chemicals an alliance in that area, say analysts. soda ash, a base ingredient in many has made a series of acquisitions in The loss-making company already industries. Under living essentials inorganic chemicals and has also has a franchise agreement with comes the company's consumer invested heavily in agri-business. It Tesco under which the Indian firm’s businesses - salt, water, branded is now focusing its attention on its Star Bazaar supermarkets use commodities and neutraceuticals. research & development capabilities. Tesco’s supply chains and Under industry essentials comes the Thriving on frugal innovation Another barrier to innovation in the group was that the inability to innovate according to the various Tata companies wouldn't talk to each other changing market conditions. Tata Motors had sensed the ABHINEET KUMAR / DEC 27, 2012 half of his leadership of India’s largest changing market condition and it business conglomerate for over two brought out the first indigenous car, he Nano, brainchild of Ratan decades. Indica, in 1999, a small truck, the Tata, has been synonymous This is also the period when Indian Ace, in 2005 and the innovative Nano with innovations in emerging companies saw an onslaught of global in 2008 to capture new market mTarkets. His effort to fill the white competition in the domestic markets. opportunities. There are more such spot between two-wheelers and mini This made customers discerning, with examples from the group, such as cars for Indian mass family better products and enhanced setting up Ginger budget hotels in transportation needs has probably customer service. 2002 and making a super computer, captured the maximum mind space “With globalisation, the need for Eka, in 2005. globally as a frugal engineering innovation became more critical for In fact, there have been many success. Indian companies’ survival,” says instances when the over-a-century- The success of Nano was not in Wilfried Aulbur, managing partner, old Tata Group has been a pioneer. In just being the cheapest car in the Roland Berger, who co-authored the 1907, Tata Steel became the first world, at Rs 1 lakh at the time of report with his other colleagues. “This Indian company to raise capital in launch. It was the innovations that led many companies to put more India. J R D Tata set up Tata Airlines made the car cheap. The global car focus on innovation to address new in 1932 and TCS in 1968. Tata industry is enthusiastic on modular market opportunities,” he says. Motors made India’s first indigenous techniques to produce automobiles For instance, when Korean auto light commercial vehicle, the Tata with different prices and design maker Hyundai Motor set up shop in 407, in 1986. features. The Nano is built from India in 1996, there were five major Though innovation has been in the modular components, which can be auto makers in the country: Maruti group’s DNA, the urgency for this built and shipped separately for Udyog (now Maruti Suzuki India), became more prominent recently. assembly at different locations. In Hindustan Motors, Premier When the economy first opened in effect, the Nano is designed for Automobiles (now Premier Ltd), the early 1990s, the group realised its distribution in kits assembled and TELCO (now Tata Motors), and business processes were weak. So, in serviced by local entrepreneurs Mahindra & Mahindra (M&M). 1995, it instituted the Tata Business globally. Today, Hyundai is the second largest Excellence Model. Any company that Germany’s Roland Berger Strategy auto maker in India after Maruti uses the Tata brand name or logo has Consultants in its recently-released Suzuki, still leading the pack. Tata to abide by the model. Under this, report on global innovation shifting Motors and M&M have been in neck- companies are given scores out of to emerging markets, says, “Frugal to-neck competition this year for the 1,000 every year. product innovations must start in the third and fourth positions. But innovation within the group company’s mindset.” But the most distinct part is that was sporadic. “We had to accelerate This is what Ratan Tata, outgoing Hindustan Motors and Premier and create urgency for the chairman of the $100-billion Tata Automobiles are no-where in the race democratisation of innovation. This Group, has been driving in the latter today, precisely because of their had become more important with the

17 Tata Group going global and the There are three categories: Promising Mody, Ajit Kerkar and Darbari Seth. A Indian economy getting globalised,” Innovations, The Leading Edge and group identity was forged, but said Sunil Sinha, CEO of Tata Quality Dare to Try. An independent jury collaboration still did not happen. So, Management Services (a division of judges the entries. From 101 from 31 TGIF decided to set up InnoClusters Tata Sons) earlier. companies in 2006, entries went up to — groups of companies that could In 2006, an InnoMission 117 from 39 companies in 2007, then work together in different areas. (innovation mission) of 10 Tata to 289 entries from 47 companies in There are four such clusters: Group CEOs went to the US and saw 2008, and 1,552 from 62 companies nanotechnology, plastics & innovation at work in companies such in 2009 to 2,852 entries from 71 Tata composites, information technology as 3M, Microsoft, Intel, Hewlett- companies in 2012. and water. One of the biggest Packard and Raytheon. The next year, The sharp jump in entries from clusters, of 10 companies, is around another mission was launched, this 2009 had a lot to do with the nanotechnology. “The Swach water time in the other direction, to successful launch of the Nano. “That purifier is a good example where Japanese companies such as Fuji, fired the imagination of the people in TCS, Tata Chemicals and Titan came Olympus, Toshiba, Nissan and the Tata Group,” said R together,” said Gopalakrishnan. Hitachi. A third mission went to Gopalakrishnan, executive director at Further, the TGIF came with a Cambridge to study the eco-system Tata Sons, earlier. web-based open innovation initiative for innovation there. After much deliberation, TGIF called InnoVerse. Employees can post The first result was the formation adopted the Innometer developed by a problem on the intranet, to which of Tata Group Innovation Forum Julian Birkinshaw of the London anybody can provide a solution. (TGIF), mandated to act as a catalyst Business School. It measures the People can bet on ideas with the for innovation. It meets every two innovation process and culture on a 1,000 karma points they get. months (in a different location so that scale of zero to five, and can be run The group spent $2.7 billion (Rs local companies can participate) to on the whole company, a unit or even 12,500 crore) on research and take stock of the situation and a small team. development in 2010-11, about three remove hurdles. Another barrier to innovation in per cent of its turnover in that year. The next step was to recognise and the group was that the various Tata So, has the Tata Group changed? It is reward innovation within the group: companies wouldn’t talk to each still early days, says Gopalakrishnan. InnoVista. These awards are regional other. Ratan Tata, when he became “It’s not as if there is a storm as well as national. Ratan Tata gives chairman in the early 1990s, eased gathering; it’s just some rain here the national awards once a year. out powerful chieftains like Russi and there.” The making of Tata’s Team A With Tata promising every help to his successor, it will be now and succeeded in getting his own up to Mistry to take the Tata Group to the next level people at the helm of every company. According to Tata Group insiders, DEV CHATTERJEE / DEC 26, 2012 predecessor J R D Tata. The group it was Kumar who was instrumental instead focused on a new generation in setting up the succession rom a group run by satraps, the businesses such as telecom, software, committee for Tata and helped set the outgoing chairman of Tata retail and cars. retirement age of Tata directors to group, Ratan Tata, will be Tata built a network of young prevent any Russi Mody episode in cFredited with building a young team CEOs, now in their 40s and running future. When Ratan Tata was under of CEOs to run their respective their respective companies efficiently. siege from Mody, the then chairman companies, giving them a free hand This includes Karl Slym, hired from of Tata Steel and Kerkar, the then as long as they followed the basic General Motors to run Tata Motors chairman of Indian Hotels, the principles of ethics, values and after Nano failed to make money. Not operators of Taj hotels, and Darbari corporate governance. Tata hired to forget other performers such as Seth of Tata Chemicals, it was Kumar the best talent from across the world Brotin Banerjee, 36, who heads Tata who played an important role in the as he saw early on that to survive in Housing Development Company; N ouster of the satraps. the wake of economic liberalisation, Chandrasekharan, 48, CEO of TCS; Since then, Tata and Kumar have Indian companies needed to go Anil Sardana, 52, of Tata Power; N led the transformation of the group global and adopt best practices. Srinath, 49, of Tata Teleservices, and from a bureaucratic setup to a Backed by a trusted Team A, led by R Mukundan, 44, CEO of Tata nimble-footed group, which is now fellow Tata Sons director R K Krishna Chemicals. earning half of its $100-billion Kumar, Tata led the transformation by Although Tata faced a tough time revenues from its overseas selling unrelated businesses such as in his career, thanks to the public operations. In a recent interview with cosmetics, soaps and cement — fight with Russi Mody and Ajit Kerkar, Business Standard, Kumar said the angering many satraps close to he managed to ease out the satraps aggressive mergers and acquisitions

18 policy of the group is now finally giving dividend. “Just look at the JLR; we are now earning every quarter what we spent on buying the company,” he said. In 2012, JLR made a profit of Rs 12,900 crore on a revenue of about Rs 1.16 lakh crore. In Tata Chemicals, R Mukundan is steering the company towards speciality chemicals and consumer products, as consumer demand change along with rising consumption. “As India becomes more urbanised and as income levels and habits change, the country’s GDP will rise and supply chains will shift; there will be demand for new types of chemicals and products,” says Mukundan. As Tata Steel Managing Director H M Nerurkar is due to retire early next year, insiders say a search is already on for the next MD. Among the front runners is 44- year old Kaushik Chatterjee, the CFO of Tata Steel, who helped the company restructure its debt taken to fund its acquisition abroad of Corus. As Kumar is also retiring from Tata Sons and group companies by July next year, Tata’s new chairman Cyrus Mistry will be starting his innings with a clean slate. This will help the new chairman to build his own team. With Tata promising every help to his successor, it will be now up to Mistry to take the Tata Group to the next level. TATA’S MILESTONES

1991 JRD Tata retires, Ratan takes over as group 1995 Darbari Seth, chairman of Tata Chemicals and chairman Tata Tea ( now Tata Global Beverages), retires 1997 Ajit Kerkar retires from Indian Hotels CONSOLIDATING CONTROL OVER THE GROUP 1997 Ratan Tata becomes chairman of key group 1993 Russi Mody removed. Ratan Tata becomes Tata companies, Tata Power and Indian Hotels Steel chairman 1998 A unified group logo launched and group companies asked to pay royalty for using Tata name to Tata Sons

DIVESTING NON- CORE COMPANIES 1994 Sells Tata Oil Mills ( Tomco) to Hindustan Unilever 1997 Sells Lakme brand and assets to Hindustan Unilever 1998 Pharma company Merind sold to Wockhardt 1998 Voltas divests white goods division CAR DREAMS AND MORE….. 1992 Tata Sierra, the groups first car, launched 1994 Tata Sumo drives out 1998 Tata Indica and Tata Safari launched

19 1998 Retail debut: Trent starts operations 2007 Indian Hotels picks up 11% stake in Orient 2003 Tata Indicom begins CDMA mobile service Express Hotels 2004 Indian Hotels launches IndiOne (now Ginger 2008 Tata Motors acquires JLR for $ 2.3 billion hotels), a chain of no- frills business hotel 2008 Tata Chemicals acquires General Chemicals, US for 2006 Tata Sky, DTH venture, starts service $ 1 billion 2006 Croma, a retail chain for consumer electronics and 2012 Indian Hotels makes bid for OEH durables starts operations 2008 Tata Motors unveils Nano, the worlds cheapest car HIS CONTROVERSIES 2009 Tata Docomo debuts in mobile service 1997 Tata Tea allegedly paid protection money to ULFA 2009 Tata Chemicals launches Swach, the low- cost in Assam water purifier 2008 Farmers’ protest Nano plant at Singur, West Bengal; Tata shifts production to Sanand, Gujarat GOING GLOBAL 2010 Ratan Tata dragged into Radia tape controversy 2000 Tata Tea acquires Tetley Group, UK for $ 450 million HIS MISSES…. 2004 Tata Motors buys the commercial vehicles unit of 1998 Tata proposal to launch an airlines rejected by Daewoo Motors, South Korea the government 2006 Tata Chemicals acquires Brunner Mond Group, UK 1999 FIs blocked Tata Sons plans to raise stake in ACC to become world's second largest soda ash maker through a preferential allotment. 2006 Tata Tea acquires Eight O Clock Coffee, US 2000 Tata group sells its entire stake in ACC to Ambuja 2006 Indian Hotels buys Ritz Carlton Boston for $170 Cement million 2001 Withdraws from race to acquire Air India 2007 Tata Steel snaps up Corus for $ 12 billion, becomes 2012 OEH board reject take- off bid by Indian Hotels the worlds sixth largest steel maker

20 FROM CLOSE QUARTERS He reshaped the Tata DNA: Rahul Bajaj atan Tata has dealt, with great finesse and aplomb. business history books. unambiguously It makes every one of us proud of his In today’s world, direction matters set the and his companies’ achievements. more than detailed maps. Ratan has Rdirection of the Tatas That TCS today has the highest unambiguously set the direction of in the pro-change, market cap is a tribute to the vision of the Tatas in the pro-change, global global direction. This the Tatas. direction. This will be his greatest will be his greatest Ratan has built very adroitly on legacy to the Tatas and to Indian legacy the grand foundations built by business in general. I have known Ratan at least since hispredecessors, especially JRD. He It is given to very few of us to live 1986 when we were appointed as has not only nurtured the Tata DNA up to our names. Whoever named Chairman of Air India and Indian but reshaped it for the new age. The him was prescient. He proved to be Airlines respectively. Of course, in very fact that he is retiring at 75 the crown jewel of the Tatas and a 1949 we were together briefly in speaks volumes of his commitment to ‘navratna’ for the country. Cathedral School, Mumbai but were managing the Tata companies As a person Ratan is genial, not in touch for some time thereafter through values. under stated, polished. A as both of us continued our studies Under him the Tatas have been gentleman. There does not seem to separately. It will be one of my both entrepreneurial and be an awkward bone in him. There unfulfilled desires that he did not demonstrated their ability to make is something of an artist in Ratan. adorn the Bajaj Auto board. At one large companies ‘dance’. They have His training as an architect of course time when Ashok and then Aditya met with the opportunities and adds to this sense. Birla was on our board I had an urge challenges of globalisation head on Ratan is very energetic. I am sure to invite Ratan. But it was not to be. and come out trumps. The he will pursue his passions. He is still Ratan must be a good player of transformation of Tata Motors young at 75. To your health Ratan. bridge. He has played very including its acquisition of JLR alone (The writer is Chairman , ambitiously with the hand he was is enough to give him a place in the Bajaj Auto) Quiet titan: Lord Kumar Bhattacharya first met Ratan nineties, while many cars were being achievement. Tata when he made in India under license, not a In these decisions we find the core was assuming single car was being made by India. of Ratan’s leadership. There’s belief in tIhe Chairmanship Ratan wanted to make a car in technical innovation and design of TataSons. Unlike India, by India - as that was the way quality, a refusal to take short cuts and most corporate to create expertise and innovation. a faith that what matters is how your chiefs, Ratan I remember many agonising days decisions are judged in the future. arrived alone, spent in the design and manufacture Today, Ratan still devotes countless driving himself in a small car made of that first car- the Indica. But if you hours to learning the nuts and bolts by a Japanese manufacturer. don't do the first one, you never learn. of his businesses. When he visits As we spoke, I realised this By the millennium, Tata had a Jaguar Land Rover, he spends time in personal modesty belied a grand global footprint. However, the biggest the design studio and on the vision: the creation of a global turning points were to come. First production line, motivating engineers business rooted in the historic Tata Tata acquired struggling Jaguar Land through his passion for technology.. values of fairness, charity and upright Rover, whose turnaround has shown Ratan isn’t brutal or cruel. He conduct. He has more than surpassed the worldwide business community believes that how you achieve your that ambition. Ratan has succeeded what Indian leadership can do. aims is as important as the objectives because he knew there needed to be Then came the “car heard round themselves. That said, while he prefers a huge transformation in innovation the world”, the Nano. Developing an agreement, he won’t allow himself to and R&D capacity to succeed in the affordable small car for the global be deflected from his ambition. newly competitive Indian and masses shows Ratan's psyche. (The writer is Founder global markets. History will show the Nano as a and Chairman of Warwick To take one example, in the tremendous design and technological Manufacturing Group)

21 Commitment to talent: Tarun Khanna oday, talent into a world-class contender in IBM tech career isn’t for everyone, as from across the pharma, pioneering a new way to successful as it is. There are world finds marry generic drugs and new drug alternative ways to make a splash in vToice at the Tata discovery. Or the Samsung group the world of technology. As Palmisano Group in a way that leadership. put it, an alternative is the much- was not the case Like Teva and Samsung, the long- glorified Silicon Valley-centric model: before Mr Tata run focus on talent has had an effect. Develop an idea, ‘flip it’ to the equity took over. Today, talent from across the world – markets, and move on to the next I have had the good fortune to whether interns from Harvard and startup. This isn’t what works at IBM, engage with the Tata Group since the other leading universities of the where there is consistent work mid-1990s, soon after Ratan Tata world, or CEOs of the major Tata applying technology to societal began a concerted attempt to reshape companies – finds voice at the Tata problems in the service of, as their the group. As an interested outsider – Group in a way that was not the case slogan puts it, ‘a smarter planet.’ educator, researcher, entrepreneur – I before Mr. Tata took office, and Similarly, there are plenty of have been trying to identify what managers find their way to leadership legitimate ways to make a splash in most impressed me about the group positions earlier in their careers. corporate India today, several of the over the past two decades under Mr Harvard Business School is get-rich quick variety. The Tatas, like Tata’s stewardship. I concluded that it fortunate to be the recipient of IBM at least in the context of this was the group’s reinvigorated largesse from the Tata Trusts, thanks discussion, represent a different path commitment to talent. It is the to Mr. Tata’s leadership. HBS will – more values-centric, more focused foundation of the group, and the soon host Tata Hall, a new building on a sustainable set of solutions to enabler of the ambitious course on overlooking the Charles River in society’s long-standing challenges. which it has embarked, and on which Cambridge, housing a state-of-the-art The group’s focus on talent is what Mr. Mistry must now build. executive education facility that will will allow it to pull this off. This is Mr. There are, of course, other nurture management around the Tata’s biggest contribution. business leaders who have world. (The writer is Jorge Paulo Lemann comparably exhorted their people to Recently Sam Palmisano, just- Professor at the Harvard Business exceed the self-imposed limitations of retired CEO of IBM, reflected on his School, and Director of Harvard their own minds. I can think of Eli multi-decade career at IBM, while University’s South Asia Institute. He is Hurvitz at Teva in Israel who speaking to one of my HBS also an adviser to the Tata converted a small, generics company colleagues. He pointed out that the Opportunities Fund) Ratan, the strategic innovator: Adi Godrej ew and vision for the group has shone businessmen demonstrate the zeal businessmen through remarkably. that he does for innovating for the demonstrate Another one of Ratan’s great bottom of the pyramid. Therefore, it Fthe zeal that he achievements is globalizing the Tata comes as no surprise to me that he does for innovating group which was by and large an has chosen to remain chairman on for the bottom of Indian conglomerate. Today, 65% of the Tata trusts and plans to continue the pyramid the groups’revenues come from his work for the bottom of the When Ratan outside India – a very significant pyramid. I can say with a fair amount took over as chairman of the TATA achievement. His bold and ambitious of confidence that we can soon group, it was a large and reputed deals cut across geographies and expect waves in the traditional group, but it wasn’t financially as scale – simultaneously surprising and concepts of philanthropy and strong as it is now. During his impressing the world. To achieve his philanthropic institutions! tenure of 21 odd years as Chairman plans, he constantly demonstrated I have known Ratan as a colleague of TATA Sons, Ratan has grown the the ability to stand up to political and a friend. His journey as the group’s revenues over 13-fold by pressures and business bullies with a Chairman of the Tata Group has been making some tough strategic tact that is so unique to him. inspirational for all of us. I wish him choices. He leveraged the strength The Tatas have always been all the very best as he embarks upon of Tata Consultancy Services (TCS) respected for their social a new chapter of his life. He will be and Tata Motors while getting out commitment besides their business missed in the business fraternity. of businesses such as Tata Oil mills acumen. Ratan has carried forward and Lakme which were not a this legacy admirably. He is a (The writer is chairman of strategic fit. His clarity of thought passionate philanthropist. Few Godrej Industries)

22 EPILOGUE Cyrus Mistry can hit the ground running Mistry’s task is cut out: Don’t lose wickets in the rush to make quick runs

KRISHNA KANT /DECEMBER 27, 2012

yrus Mistry, who took over captaincy of the Tata group on December 28, doesn’t have to wCorry about the wicket. With a team comprising some of India’s best corporate leaders — all carefully handpicked by his predecessor — Mistry can surely hit the ground running. For, Ratan Tata is passing on to Mistry a group much bigger, more profitable, more diversified and financially stronger than what he inherited from his uncle, JRD Tata, in 1991. Mistry will be chairman when Tata Sons is firmly in control, with a shareholding of well above 30 per cent in all group companies. He inherits a group 51 times larger in terms of revenues and profits than Tata did in 1991. The group has grown at a compound annual rate of 21.7 per cent. Its growth has been at a higher pace than the increase in India’s gross domestic product, which grew at a CAGR of 14.4 per cent at current prices, according to Central Statistical Organisation estimates. The group also beat the stock market, with its market capitalisation growing at a financial returns?” asks the head of a 1992. In comparison, the BSE Sensex faster rate than the BSE benchmark Mumbai-based brokerage house, on has appreciated a little over four Sensex during the period from FY92 condition of anonymity. times during the period (see table). to FY12. The growth in market Despite his costly foreign The group has four companies in capitalisation has been slower than adventures, Tata is retiring with the Sensex — with a combined headline numbers but that is not a lower debt-to-equity and higher weight of 13 per cent — second only like-to-like comparison. In 1992, return on net worth than those when to the government-owned companies India was in the middle of a bull run, he came in. This is partly attributed that together weigh 26 per cent. while the economy at present is to free cash flow from TCS. “Even Under Ratan Tata’s watch, the experiencing a downturn, and without TCS, most of the large Tata group spent $20 billion — nearly a valuations are depressed. This is clear Group companies are financially well quarter of the group’s current assets in Tata Group’s performance against placed and Tata Sons has multiple — on acquiring marquee assets, most the Sensex. At the end of March this avenues to raise resources, if of which still deliver below-par year, the group was 15 times more needed,” says Deep Narayan returns. This opened him to criticism valuable than in March 1992. Even if Mukherjee, director of India Rating, from markets and analysts. “Marquee we exclude Tata Consultancy Services which currently rates a dozen Tata acquisitions did bring in revenues and (TCS), the group’s combined market companies. global attention but where are the value has risen eight times since Twenty years after Tata took over,

23 the group is more diversified and less WHAT CYRUS MISTRY INHERITS prone to business cycles than earlier. FY12 CAGR (%) In 1992, there were 21 listed In Rs crore FY92 With TCS Without TCS With TCS Without TCS companies in the group. This tally has now increased to 29, including REVENUES 8,884 452,857 403,535 21.7 21.0 subsidiaries and associates of key OPERATING PROFIT 1,643 66,399 51,535 20.3 18.8 group companies such as Tata Steel, NET PROFIT 580 29,369 18,956 21.7 19.0 Tata Motors, Tata Chemicals, Indian EQUITY DIVIDEND 1,950 8,669 3,776 20.9 16.0 Hotels, Tata Power and Tata Global NET WORTH 3,535 143,858 114,279 20.4 19.0 Beverages, among others. The ASSETS 8,638 349,941 319,174 20.3 19.8 group’s holding company directly MARKET CAP 29,068 454,645 226,074 14.7 10.8 owns and controls only 14 firms. ROCE (%) 15.2 14.4 11.4 To that extent, the group has a Source: Capitaline, BS Research clean and well-defined ownership structure, with one firm in control of revenues while another 10 per cent is Motors could be the first one all group assets in a particular accounted for by TCS. This has made seeking his attention. The company, sector. For instance, all steel and the group highly resilient to an despite its apparent financial related assets are housed under Tata economic downturn in India and that success, continues to lose ground to Steel. This not only caps the risks of is visible in its stock market rivals in the passenger vehicle minority shareholders but also gives performance in last three years segment in the domestic market. them the freedom to choose the (see chart). M&M and Hyundai have gained sector they wish to invest in. This is The transformation is best market share at the expense of Tata unlike other business houses such as captured by Tata Motors, now Motors — the business about which Reliance Industries and Mahindra & completely different from its avatar Tata is personally passionate. Mahindra where the flagship in the early 1990s but still the Tata Steel, which came on the company holds all group ventures. group’s largest revenue earner. It global map with the acquisition of Since 1992, the Tata group has accounts for a third of the group’s Corus (now Tata Steel Europe), transformed from an old-styled revenues and continues to be the continues to make losses in that conglomerate, earning 90 per cent of country’s largest commercial vehicle continent. It is a financial drag on its revenues from industrial products maker, even as the segment now the group’s balance sheet due to its such as heavy trucks & buses, steel, accounts for only a quarter of its sheer size. Its other capital-intensive inorganic chemicals and electricity. Its business. The company, one of the business, Tata Power, is also facing portfolio now includes some of top performers on Dalal Street in headwinds. Its Rs 18,000 crore India’s most successful consumer recent years, gets nearly three- investment in the Mundra Ultra brands such as Titan, Fastrack, Tata fourths of its business from selling Power Project became financially Tea, Tata Salt, Tetley, Westside, Tata passenger cars. unviable as the backward Docomo, Voltas, Croma, Tata Sky and investment in Indonesian coal mines Jaguar Land Rover, among others. CHALLENGES didn’t move according to the script. Consumer products now account These, however, does not imply that Mistry would need to fix the for nearly 40 per cent of the group’s Mistry will face no challenges. Tata telecom business, too, as it continues to bleed and shows little signs of an operational or financial revival in the near term. In all of this, he has to also demonstrate to the stock market and the minority shareholders that he will provide them with the best bang for their buck. At the end of FY12, only a third of the group’s listed companies reported returns of 15 per cent or more on capital employed. At 11.4 per cent, the group’s overall return ratios (excluding TCS) don’t look great, either. This goes on to show that either the group over-invested during the boom or there remain a lot of inefficiencies in the system. To that extent, Mistry’s task is cut out: Don’t lose wickets in the rush to make quick runs.

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