Ratan Tata built Brand Tata and served as India Inc's ambassador to the world

Itis to Tata's credit that, even as the group remains enormous, no Opposition sloganeer chants Tata-Birla ki sarkar

Ratan Tata

Ratan Tata ran the Tata group of companies, one of India’s largest business groups, from 1991 to 2012, without being featured among the world’s richest, even as leaders of smaller business groups figure among the world’s mega billionaires. The Tata group has operated outside India since Ratanji Tata made a pile of money in the opium trade in the late 19th century, but it was Ratan Tata who made Tata a global presence, through strategic acquisitions, savvy consolidation of the Tata brand and its unified projection. The Tata brand benefitted every individual group member, in terms of name recognition, trust and reliability, and, owing to such trust, a lower cost of capital than what it would have faced as a standalone company outside the group.

Everyone remembers Tata for his ambition to produce a car for a price of Rs one lakh, and for his acquisitions of Tetley Tea, Jaguar Land Rover, Corus Steel, and, recently, Air India. TCS had been set up in 1969 by Ratan Tata’s predecessor as Tata Group leader, JRD Tata, and FC Kohli ran the firm successfully for a long period, till 1996. But the Indian IT services industry really took off in the period since, with TCS in the forefront. Ratan Tata, as the group leader, helped identify capable successors to Kohli, delegated authority to them, and helped them evolve. Even today, TCS remains the group’s cash cow.

In 2007, an Indian supercomputer, Eka, ranked among the world’s fastest computers. Ratan Tata backed the development of the machine. The commitment to R&D visible in this enterprise did not, however, manifest itself in other parts of the Tata group. Only very recently have the Tatas taken the lead in research-based innovation, creating an indigenous 5G hardware ecosystem, spearheading research, carried out through a bunch of pioneering startups. Every industrial group, including the Tatas, share the blame for India’s R&D expenditure remaining an abysmal 0.64% of GDP, a shade above Gabon’s 0.60%, but shamefully below Israel’s 5.6%, South Korea’s 4.9%, Japan’s 3.3%, America’s 3.46% and China’s 2.65% of GDP.

In the early years after Independence, Indian Communists, the largest Opposition of the time, characterized the government of India as the government of Tata and Birla. Times have changed. Today, the government is characterized by the Opposition as the government of Adani and Ambani, even as the Tatas remain one of the largest business groups. Whatever the merits of this description, the fact remains that the Tatas do not carry the opprobrium that they bend the state to its own ends. This owes not a little to Ratan Tata’s leadership of the group and his style of functioning.

The Opposition has valid grounds for pillorying the Tata group for the role it played in burnishing the business-friendly reputation of the then chief minister of Gujarat, Narendra Modi, by moving his Tata Nano project from West Bengal to Gujarat, where the state government welcomed it with open arms and generous concessions, after an agitation against land acquisition for the project in West Bengal made progress difficult. But no major politician of any party has chosen to harp on that today, in the wake of his demise. This is because Tata as a person and as a business leader, was not overtly political, and made political contributions through a Trust, based on votes secured by parties contending for the donations.

This does not mean that Tata’s career as leader of the Tata group was free of controversy. When he took over from JRD, the group companies were autonomously run by a bunch of powerful satraps, who did not see any reason to be accountable to the group holding company, Tata Sons. Ratan Tata changed that. He consolidated the different parts ranging from iron and steel, salt, chemicals and automobiles to hotels and software services as a tightknit group, introduced a retirement age of 75 for board positions, and applied that rule to himself. This got rid of the Satraps – although Taj Hotels’ Kerkar had to go over foreign exchange violations – and made Tata Sons the ultimate arbiter of the fortunes of group companies.

When Ratan Tata stepped down in 2012, he was succeeded by Cyrus Mistry, son of Pallonji Mistry, the largest shareholder after the Tata Trusts. He was ousted in 2016. Controversy clouded his removal. Mistry was a manager, rather than a leader, choosing to focus on the profits and losses of individual enterprises in the group rather than on the group as a whole, and or on the impact of the Tata Group’s actions on the economy as a whole.

To illustrate, when Tatas’ forayed into telecom services, floated in collaboration with DoCoMo of Japan, the joint venture agreement included an opportunity for DoCoMo to exit at a pre-fixed price. Mistry took advantage of a technicality in rules governing such exits to wriggle out of making that that payment, once the venture floundered. If it turns out that the Tata Group cannot be trusted to honour a joint venture agreement, it would damage the reputation not just of the group but of all of India Inc. Mistry was unmindful of that larger damage. Ratan Tata was not. After Mistry’s removal from Tata Son’s chair and later, Board, the payment due to DoCoMo was made good.

Ratan Tata has led the Tatas into manufacture of electronics, into making the metal scaffolding of the Boeing 737 Dreamliner that holds together the plane’s carbon fibre fuselage. Tata Advanced Systems was founded in 2007, and plays a vital role in the indigenization of Indian defence production.

Ratan Tata entrusted the leadership of the group to a non-Tata, N Chandrasekaran. There is no particular reason for the professionally run group to necessarily choose another Tata to head the company in the future. The Tata trusts that hold the controlling stake in Tata Sons can, in theory, choose another Tata to lead the group, but as the group turns ever more diverse and complex, professional leadership is at a premium. Thus, the Tatas might well prove to be the first Indian group to cede leadership to merit rather than prefer genes.

When Jamshedji Tata founded the Indian Iron and Steel Company in 2007, it was a qualitative step forward for Indian business. The Tatas have also pioneered philanthropy, setting up advanced research institutions. Ratan Tata has extended that legacy, and taken it another qualitative step forward.