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India's Industrialist Ratan Tata to Retire
When Orient-Express Hotels Ltd – the Bermuda-based firm that owns 45 hotels, cruise and luxury rail businesses across 22 countries – rebuffed a $1.2-billion takeover bid from Indian Hotels Co (IHC) Ltd recently, dubbing it “financially unattractive,” the snub may well have bruised India’s second largest hotel chain owner Ratan Naval Tata’s ego.
As one of India’s most storied industrialists, Tata, chairman of the Tata group, of which the Indian hotels chain is a unit, has been looking to expand his global hospitality footprint from 110 properties at present, most of them in India, by getting hold of Orient Express. A large international presence would also have hedged IHC’s risk in India, where it currently earns more than 70 per cent of its turnover.
Although Indian Hotels recently opened a Taj hotel in Morocco, has signed some management contracts in China, and owns The Pierre in New York and the Ritz Carlton in Boston, the group’s international business isn’t exactly spectacular.
Tata had another reason to push for the Orient Express takeover, his second attempt at acquiring the luxury concern. It would have brought down the curtains with a flourish on his half-century career as he prepares to hang up his boots next month on turning 75. Under his chairmanship, which began in 1991, the salt-to-software Tata conglomerate has grown exponentially from a US$2 billion enterprise to a US$83.3 billion one today, with two-thirds of its revenue coming in from a welter of overseas acquisitions over the years.
Not surprisingly, when Tata announced his retirement last year, the succession issue made the international business press. His conglomerate after all straddles 98 companies in more than 80 countries and is India’s largest private sector employer with a staff of over 350,000.
Tata’s career has seen him embroiled in tough battles, sometimes in shareholder meetings fraught with tension, others involving face-offs with business rivals or canny politicians. Yet other battles have involved perilous decision-making to sell off unprofitable businesses units or to steer the group through the last downturn.
What became Tata Group was founded in 1868 by Tata’s great grandfather Jamsedji Tata. Ratan Tata, an alumnus of Cornell and Harvard Universities, has striven to give the group a more cohesive and global identity. He is also credited with big-ticket acquisitions like the Anglo-American steel giant Corus and luxury carmaker Jaguar Land Rover, which have given the conglomerate a global bandwidth.
What kind of a legacy is Tata, an intensely private person who drives his own car, flies his own jet plane and lives in a bachelor pad surrounded by books and dogs in Mumbai’s Colaba district, leaving behind?
Analysts say that despite impressive growth numbers, Tata’s business record is mixed, that despite phenomenal resources and talent at his disposal, he isn’t leaving behind any enduring global product with his imprimatur on it. For instance, Tata Motors, the flagship company, had the potential to deliver India's overdue equivalent of a world-renowned car like say, Japan’s Toyota, Germany’s BMW or even South Korea’s Hyundai.
Instead, all that Tata Motors rustled up was the Indica, the country’s first fully indigenous series of cars that came a cropper both domestically and internationally. Similarly, Nano, the world's cheapest car at US$2,000 which launched in 2009, was meant to be Tata's great personal legacy. Instead, the badly-engineered vehicle has sputtered its way to public ridicule and a great personal embarrassment for Tata himself.
Nano especially was expected to be a roaring success in a price-sensitive country like India with its burgeoning bourgeoisie population, which increasingly sees a four-wheeler as a status symbol. But despite innumerable promotional activities and facilitation through easy financing, the car’s sales remain abysmal. Analysts who predicted Nano to be a showcase of frugal engineering are befuddled as to what went wrong. The various fires that transpired after the beleaguered car’s launch further sealed its fate.
However, professional hiccups notwithstanding, analysts say Tata’s personal legacy is irreproachable. At a time when Indian corporate history is replete with examples of prominent family-owned business houses getting embroiled in acrimonious succession battles (Reliance, Bajaj, Birla, Ranbaxy, to name a few), the transition at Tata has been both seamless and bloodless. Last year, Tata handed over the Chairman’s baton to Cyrus Mistry, 44 after a four-member group appointed by the organization, chose him from among multiply contenders after what was widely billed as a “fair” election process.
“In a country where corporate leaders and politicians enjoy the cat’s proverbial nine lives, the tycoon displayed exemplary professionalism in handing over charge to his successor in a bloodless transition,” says sociologist Ajay Khemka, who is writing a book on Indian business houses.
What are the challenges that lie ahead for Tata’s successor? Number one challenge, say insiders, will be to navigate the group through the headwinds of a challenging global economic climate. Infusing growth in a bruising corporate environment will be challenge number two. Making the Tata Group a truly global entity will also be vital, as also sensitivity towards the core values that have made the company what it is today.
“Tata’s successor has hit the ground running. Apart from getting to know the workings of a hugely complex organization, he will also need to deal with the twin acquisitions of Jaguar-Land Rover and Corus Steel. both of which were brought on by economic freefall after top-of-the-market acquisitions,” adds a well-known Delhi industrialist.
What role is Tata likely to play post-retirement? Those expecting the dynamic tycoon to retreat into a quiet life in the innards of his newly built, sea-front mansion in Colaba, at the southern tip of Mumbai, will be in for a surprise, say insiders. In fact Tata, they say, is contemplating a serious plunge into philanthropy. No genteel job this considering the Tata trusts are the country’s biggest foundations and among the top 10 in the world. Managing these will be a gargantuan task as they have touched the lives of several million underprivileged over many decades.
Analogies are also being drawn between Tata and American billionaire Bill Gates who has devoted himself to his charity, the Bill & Melinda Gates Foundation, shortly after stepping down as CEO at Microsoft in 2000.
Knowing Tata, the tycoon may well end up rewriting the rules of Indian philanthropy as well, pretty much as he redrew the contours of Indian business many decades ago. His successor, Mistry, has already acknowledged that he has a “Herculean task” ahead of him. Ratan Tata will indeed be a difficult man to fill in for.