Dear Reader,

The passing of one of India's tallest industrialists makes one assess the many-faceted legacy he leaves behind, most enduring of which would be the values he cherished and coded into the group's culture. From investors' standpoint, the one thing that stands out most is the numerous trailblazing acquisitions made by the Tata group under the stewardship of Ratan Naval Tata (RNT) and most of them big brands and in developed markets. He showed investors a possibility which was grand in vision even if ultimately not all of them lived up to it.

Be it Tata Steel’s acquisition of the Anglo-Dutch steel giant Corus Plc, Tata Motors’ all-cash deal to fully buy out the United Kingdom(UK)-headquartered luxury car brand Jaguar Land Rover, Tata Tea’s (now Tata Consumer Products) acquisition of the British tea company Tetley or even Tata Chemicals’ acquisition of Brunner Mond Group in UK and General Chemical Industrial Products in the US to name a few, these acquisitions were transformative for the group in several ways.

First, it brought leading global brands into the Tata stable, enhancing its existing brand equity and expanding markets. Second, working with developed economies through the process of integrating the acquired company, brought with it the knowledge of law and regulations of these regions, the need for innovation to stay ahead, the importance of rigour in manufacturing and operational efficiencies and a compelling desire to compete in a global marketplace. Third, blending of the workforce from various regions into a common cultural ethos also raised the bar for best practices in human resource management.

Indeed, RNT must be credited for backing each of these acquisitions and holding ground through trials and tribulations. For instance, JLR’s trials and tribulations through critical times such as Brexit or its debacle in China and the ill-timed Corus acquisition given the global financial crisis that dented business and saddled the company with debt are not unknown. But, as oft stated by senior management, the legendary business tycoon’s resilience gave executives the ability to push boundaries until they succeeded. Today, Tata Motors has over two-thirds of its revenue and profits accruing from global sales of luxury car brands Jaguar and Land Rover. Or for that matter, being pragmatic as facts changed, as in the case of Tata Steel. As India’s consumption of steel increased since the Corus’ acquisition, Tata Steel rejigged its strategy and now about 60 percent of the consolidated revenue accrues from domestic markets. The overseas business is no longer seen as crucial for the company's profitability.

This is not to say that RNT was in awe of merely the western world. India’s local expertise or potential was never brushed aside. Tata Consultancy Services (TCS) that made its debut on Indian bourses under RNT leadership today stands tall as the market leader in IT services, with its consistent dividend history and the most profitable investment by Tata Sons so far. So also, Indian Hotels Company that houses the legacy ‘Taj’ brand has turned around its strategy to include multiple stay options for business and leisure travellers across social strata, going down the pyramid that is. The most recent reacquisition of Air India, perhaps one that offered succour to RNT’s soul, came a full circle as it was the first airline that soared high in Indian skies before being nationalised. The group has also successfully overcome the perception that it was much better at running industrial businesses than consumer-facing businesses.

Indeed, during his tenure, the group’s revenue grew from about Rs 18,000 crore to Rs 5.5 lakh crore (from $6 billion to $100 billion). Read here, how the group’s market capitalisation grew 17x as it transitioned from legacy to a global powerhouse. 

Data collated by the MC Pro Research team also point to significant improvement in indicators in companies such as Tata Steel, Tata Motors during his tenure, not to mention the big successes in consumer sectors with companies such as Titan Company and Trent becoming large franchises.

As is the case with most business leaders, taking over the reins at a time when the group was run by legendary satraps who ruled the roost under the founder JRD Tata, was not easy. “There were audacious experiments and purchases, not all of which succeeded,” writes Prosenjit Datta is this column. But, the soft-spoken leader’s appetite for risk was in sync with the environment created by India’s economic liberalisation when he took over the Tata Group in 1991.

To be sure, RNT had a fair share of challenging and undesirable moments in business. Failure of Nano, the Rs 1 lakh car was a dream that turned nightmarish. Not only were sales dismal, it took years for Tata Motors to recover from its costly failure. Also, the unceremonious sacking of Tata Sons’ former Chair, Cyrus Mistry and the resultant management feud with the Shapoorji Pallonji family, which owns 18 per cent of Tata Sons, tainted RNT’s humble and suave image.

That said, his humility, humaneness and philanthropy is a legacy that goes beyond mere boardroom decisions. He leaves behind an indelible imprint in India’s business history.

There is some ambiguity around future leadership of the multi-billion dollar Tata group, which is owned largely by Tata Trust. One would like to believe that he has set the stage for professional leadership at a group level with the appointment of N Chandrasekaran as the chairman of Tata Sons and various group companies. Or perhaps, in true RNT style, has he silently handed over the leadership baton to someone but is undisclosed as yet?

What he will be remembered for is best summed up in his own words. This FT article cites RNT’s quote from one of its earlier articles on him, “I would hope that people would say that I was able to lead the group with dignity and that I tried to do the right thing,” Tata said in 2012 of his legacy. “You never succeed, having that said, because you always have upset somebody or another, but I think that’s what I would like to be remembered for.”

 

Investing insights from our research team

Amber Enterprises: Momentum building up on multiple fronts

Sundaram Finance: This asset-financing NBFC offers good risk-reward potential

Logistics sector: Cruising along the road to profitability

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Vatsala Kamat
Moneycontrol Pro