Home / Companies / Ratan Tata: When the ride got rough

Mumbai: In 1997, the Assam government accused Tata Tea, which had tea plantations in the state, of aiding the banned militant outfit, the United Liberation Front of Asom (Ulfa). The case had its roots in the arrest of female Ulfa member Pranati Deka in Mumbai, where she had gone for her delivery and was accompanied by another Ulfa activist. It came to light that financial assistance and the necessary medical arrangements for Deka were facilitated by Tata Tea, which said it wasn’t aware of her identity and the help was part of a medical aid scheme for the people of Assam.

In 2010, taped conversations between corporate lobbyist Niira Radia and several businessman, politicians and journalists surfaced in the public domain, and were published in some magazines. Tata was one of the industrialists featured on the tapes. Radia’s company used to handle public relations for Tata group companies until recently. Radia was questioned by law enforcement authorities in connection with the 2G spectrum scam. Tata moved the Supreme Court against the publication of his conversations with Radia on the grounds that it was a violation of his right to privacy.

In 2001-2002, Tata Finance Ltd (TFL) was rocked by a scandal in which the group stumbled upon gaping holes in the company’s balance sheet. The firm’s capital adequacy ratio was found to be propped up by dubious means. TFL made huge losses by playing the stock market through a subsidiary. One of its directors was arrested on charges of insider trading. The Tata group laid the blame on then TFL managing director Dilip Pendse, who in turn said he was being made a scapegoat by the company’s board, which was aware of what was going on. Auditor AF Ferguson issued a report criticizing corporate governance standards at TFL and its subsidiaries. The report was later withdrawn by the audit firm.

Tata Steel Ltd, for which Orissa is a strategic location in terms of raw material availability, has encountered several hurdles in the state over the years. The biggest of them was at Kalinganagar, where it wanted to construct a 6 million tonne per annum steel plant. Police firing in 2006 that killed some tribals protesting against the project led to a prolonged delay. Tata Steel eventually overcame resistance and work is on to commission the unit by 2014. Protests over land acquisition have also dented plans to set up a special economic zone at Gopalpur in the same state. More recently, the Orissa government slapped a hefty fine on the company as part of its crusade to clamp down on alleged illegal mining of iron ore.

As with Tata Steel in Kalinganagar, Tata Motors Ltd’s plan to set up the Nano factory in Singur, West Bengal, was met with local resistance, which was utilized by Trinamool Congress leader Mamata Banerjee to fuel her campaign against the state government in 2010. That led to her becoming West Bengal chief minister in 2011. The protests over a two-year period beginning 2006, which witnessed violence and loss of life, forced Tata to shift the project to Gujarat, abandoning Singur, where some investment towards creating the infrastructure for the small car factory and ancillary units had already been incurred. This took the air out of the hype around the car.

The largest acquisition made by the Tata group till date didn’t come easy. It was characterized by a protracted battle between Tata Steel and Brazilian steel manufacturer CSN, both looking to gain control of the Anglo-Dutch steel maker. In 2006, Tata Steel made a $7.6 billion bid for Corus and eventually acquired the firm for around $11 billion a year later, raising the bar to fend off competition from CSN, which challenged Tata’s acquisition and made a counter offer to shareholders. The acquisition hasn’t panned out as Tata wanted it to, with the Tata Europe unit’s performance dragging down that of its parent.

The Nano hasn’t done as well as Tata had expected it would. Even after putting Singur behind and launching the Nano from Gujarat, Tata Motors hasn’t seen the kind of traction it would have wanted. Sales in November were at 3,503 units, down from 6,401 units a year ago. Targeted at first-time car buyers graduating from a two-wheeler, the Nano eventually had to be sold at a higher price than its much-publicized 1 lakh tag owing to cost pressures. Tata himself admits that the Nano could have been marketed better, but also blames the delay incurred in shifting the plant to another state for the lukewarm response to the world’s lowest-priced car—the Nano was launched long after the hype surrounding it was built up. According to Tata, the Nano is being refreshed to realize its promise.

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