Mumbai: During his 18-year tenure as chairman of Tata group, 71-year-old Ratan Tata has led a drive to expand internationally—a strategy the country’s other sprawling companies seek to emulate.
Global sensibilities: Tata group chairman Ratan Tata.
With annual revenue above $70 billion (Rs3.24 trillion), Tata group now derives 65% of its sales outside of India and employs 357,000 people worldwide. It has interests in tea, hotels, cars, steel, chemicals and information technology, among others.
But the last two years have been among its rockiest as the company, which was founded in 1868, swallowed two big overseas acquisitions just in time for a global financial crisis.
Tata Steel Ltd bought Anglo-Dutch steel maker Corus in 2007 for $12 billion, while Tata Motors Ltd paid $2.3 billion to buy Jaguar and Land Rover (JLR) from Ford Motor Co. in 2008, two pricey deals that put heat on Tata, who is a descendant of the conglomerate’s founder.
Next week, Tata will be travelling in the US with Prime Minister Manmohan Singh as part of a business delegation.
In an interview, he talks about the value of the Corus and Jaguar acquisitions, company succession plans for when he retires in three years, the conglomerate model and how Indian companies can manage their image in the US. Edited excerpts:
Also SeeA look at Tata group
Both the Corus and JLR deals added a lot of debt to the overall company’s picture. Were these purchases worth the financial burden?
There were many questions raised regarding whether these two large acquisitions—Corus and JLR—are worthwhile and whether the prices were right in terms of being at the top of the market, virtually. My view on that is that if you want to buy a house and that house is of a particular value, then it may not be there if you wait. On that basis, we bought those two companies.
(Corus) gave us presence and scale which it would be difficult to achieve in India over the next eight years. (JLR) gave us international brands which we would have taken many, many years and many billions of dollars to establish in those countries. We have been careful not to try to create a gravy out of this one and sort of merge it with Indian operations. We have brands to nurture and hopefully bring back to their former glory.
If we assume that the global meltdown is a phenomenon that will be over in the near term, I think we will look back and say that these are very strategic and worthwhile acquisitions.
How has Tata group managed through the recession?
The main way has been basically to undertake a major cost-cutting and consolidation exercise. Undoubtedly, in some of our companies, it has been large borrowings which we had to overcome. But it has also been some divestment of assets and creating liquidity in the companies. For the most part, we have met the targets we set but for some parts we found that it is not possible because the whole economy has been depressed.
What would you say you did particularly well?