Interview with Indian Industry Mogul Ratan Tata "We Indians Have to Struggle to Catch Up"
The Tata conglomerate is perhaps the single most influential company on the Indian subcontinent. SPIEGEL spoke with Ratan Tata about his company's recent purchase of Corus, doing business in India and how his country compares to China.
Ratan Tata lives alone with two German shepherds in a modest apartment a floor below his stepmother in central Mumbai, formerly called Bombay. The 69-year-old still goes to the office every day and, though he owns a collection of Western luxury cars and has a pilot's license, shuns ostentation. Tata has a reputation to defend as a living legend in the business world, shrouded in an aura of humility that borders on self-denial.
Tata Steel is now the world's fifth largest producer of steel after its takeover of Corus was finalized earlier this month.
At the end of the 19th century, the firm's founding father, Jamsetji Tata, was inspired by the idea of helping restore India's wealth. Long before many western industrial nations followed suit, his company introduced the eight-hour working day (1912), maternity leave (1928) and even profit sharing for employees (1934).
It is thanks to Tata that this massive country had its first weaving mill, its first hydraulic power and steel plant, its first college -- and its first luxury hotel. The company thus became both a symbol and reflection of the country -- including the forays into the planned economy, bitter expropriation battles and occasional chaos triggered by mismanagement.
When Ratan Tata took over the helm from his uncle 16 years ago, the conglomerate resembled an opaque jungle of companies. He rebuilt, tore down, expanded and forged a powerful holding company out of the general merchandise store with its approximately 300 individual companies. That holding company today functions primarily in seven areas, including steel, automobile production, information technology, telecommunications and energy.
Anyone who travels through India encounters the name everywhere they turn. Tata -- it is the TelekomSiemensSAPVolkswagenThyssenKrupps of India. The business volume grew from $4 billion annually in 1991 to more than $22 billion today. Additionally, about two thirds of Tata holding company shares have been placed in non-profit foundations. In fact, Ratan Tata leads the business in keeping with his family's values: modest, community oriented, extremely reclusive.
Der SPIEGEL spoke with Ratan Tata about the takeover, and about India's rise to the status of world economic giant.
SPIEGEL: Mr. Tata, the purchase of Corus is the largest ever takeover of a foreign firm by an Indian company. Was this just a business deal, or -- as many observers have suggested -- a symbol of India's growing influence?
Tata: It is primarily a strategic acquisition. Corus offers us a good springboard for entry into the European market. It enables us to achieve a global scale. And most important: Corus employees are similar to ours and used to producing our kind of top quality products. All things considered, it was a very good expansion of our steel business. And even if I don't see the deal symbolically -- maybe it shows that an Indian company now not only wants to play an important role in India, but also seeks to be a global player.
SPIEGEL: It turned out to be an expensive move. Was Corus worth that much?
Tata: Those who accuse us of having paid too much are passing judgement too quickly. Of course in the end we paid more than we wanted to. But neither we nor our negotiating partners at Corus drove the price up. Rather, hedge funds got involved and our Brazilian competition suddenly entered the bidding. But I did not see any alternative to Corus. And I still believe that we can benefit from the many synergies that exist.
SPIEGEL: Tata is considered by many to be a company with a strong sense of corporate responsibility. Yet you haven't given Corus personnel any job guarantees.
Tata: I'm going to stay out of this debate, except to say the following: We don't break companies up and, under normal circumstances, we don't just shut down factories.
SPIEGEL: After the news of the takeover was made public, Tata share-prices fell massively.
Tata: Many investors wrote to congratulate us on the deal. Amazingly, they saw a completely different picture than did many analysts, private equity players and investment bankers
SPIEGEL: who ask: What happens to Tata if the demand for steel collapses and worldwide prices again take a dive?
Tata: It is our responsibility to ensure that something like that does not happen in the first place. You know, a few years ago in India the automobile market collapsed. At the time, we didn't lose any of our market share, but that part of our business shrank by about 40 percent. We were unable to shut down any factories or to lay anyone off. We just sat there and bled. It was the most frustrating period in my whole life. And while we were restructuring, we also needed money, but hardly anyone was interested in Tata shares. Even our holding company had to jump in. Today a share is worth more than 13 times as much -- an argument that I hope will also convince the skeptics in the steel business.
SPIEGEL: For the very first time, Indian companies last year spent more on acquisitions abroad than foreign companies invested in India. It seems that India, despite a population of over 1 billion, is becoming too small for its own companies.
Tata: Actually, we have invested more within India than abroad. But there is indeed a perception that the opposite is true. Many of our domestic projects are unfortunately sitting around waiting for political approval. And I ask you: How much time would it take in India before we would be given the green light to take over a company as large as Corus?
SPIEGEL: Tata isn't just involved in the steel business. It still controls a conglomerate of about 100 unique enterprises. How does all that fit with the internationally dominant management philosophy of concentrating on a core business?
Tata: In the early 1990s we slimmed down significantly and now we only have seven, clearly defined business segments. Within each segment, operations can be streamlined. And we have done that. But ultimately these are really very unique segments. I cannot see how our chemical sector could meld with our auto sector.
SPIEGEL: Which branch would you say has the brightest future ahead of it?
Tata: It depends on the criteria you are using: IT and the entire communications business clearly have the greatest potential for growth. But if you're talking about sheer size, the steel and auto industries will, I think, remain at the top. Even before the Corus takeover, 50 percent of our turnover was coming from these two sectors. Growth may not be enormous when measured in percent. But in absolute figures, the two segments will remain impressive for a long time.
SPIEGEL: Already, one third of Tata's turnover comes from abroad. What is still Indian about your company?
- Part 1: "We Indians Have to Struggle to Catch Up"
- Part 2: "India Has Probably Lost Ground to China"