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.

Tata Steel is now the world's fifth largest producer of steel after its takeover of Corus was finalized earlier this month.

Foto: AFP

Despite the appearances, though, Tata is not only one of the richest people of India, but also the last scion of a business dynasty that arguably has had more influence than any other company on the 1.1 billion Indians on the subcontinent.

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.

At the beginning of April, Tata finally completed its $11.3 billion (€8.45 billion) takeover of British-Dutch steel giant Corus, a deal which had been in the works since last autumn. The move instantly catapulted the company to fifth place in the internationally booming steel business -- and Chief Executive Tata into the limelight of public interest. Recently there was a rumor that he was planning to spend additional billions to snap up a large portion of Deutsche Telekom's IT business unit, T-Systems.

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?

"India Has Probably Lost Ground to China"

Tata: Actually, we have always looked very much within. Moving to export some of our products was our only expansion. It was only two or three years ago that we began realizing that we could no longer remain dependent on a single market -- that we could grow abroad through investment and acquisition, particularly in those countries where we could operate similarly to the way we do in India. It would be great were we considered abroad as a globally operating company with a local touch -- that just happens to be owned by a group of Indians.

SPIEGEL: So you really would like Tata to be seen as an "Indian" company?

Tata: Not in the ethnic sense. I would prefer if we were seen as a part of the global community. Coca-Cola is sometimes seen as being too much of an American company. I prefer the way Shell is perceived. It, too, is an international brand, but you really have to take a close look to realize that Shell is a British-Dutch firm.

SPIEGEL: Your development strategy has set its sights primarily on regions such as Africa or South America, but also on China. Does Tata simply understand developing countries and their problems better than Western companies do?

Tata: We at least approach them with the honest desire to operate on the same level.

SPIEGEL: And with an eye on the huge numbers of people who are still struggling to get by, your business plan also calls for the development of a $2,000 car.

Tata: It will cost $2,200. And you know why we took on this project? Again and again here in India, I see entire families riding a single scooter: The father drives with one child standing just in front of him, and the mother sits behind with a baby on her arm. I have seen that so often… even during rainstorms or at night. And each time, I think: Oh God, can't we do something to help these families travel more safely? So we launched this project. Our goal is to develop an inexpensive and safe vehicle.

SPIEGEL: With all your good intentions -- you surely want to earn money from the project as well.

Tata: Of course. We won't subsidize the project. And we have taken on a formidable challenge when it comes to the costs of materials and the profit margins. Many people, some in the company, and even some on the project team itself, thought at first that we would fail. Now they are just as surprised as I myself am that we have actually come very close to achieving our goal. The car will come on the market in 2008.

SPIEGEL: Most Tata shares are held today by foundations dedicated to improving the quality of life in India. Is your family's humanitarian philosophy something unique or do Indian companies generally have a greater sense of social justice than their Western counterparts?

Tata: It is neither typical for Indian firms nor for international companies. But there are comparable companies both in India and in the West that invest a part of their profits in charities. But in a country like India, the money is less likely to flow into art exhibits than into poverty relief projects.

SPIEGEL: Is India's economy experiencing a new era of self-confidence or is it already tending toward overconfidence?

Tata: I am pleased with the newfound confidence. But it should not be based on unrealistic dreams. We live in a highly competitive world -- and we Indians have to struggle to catch up. So modesty is necessary, even if there is also a need for a certain amount of national pride. When it comes down to it, we have managed our country's economy poorly for long enough. There is really no reason to now think that we can conquer the world.

SPIEGEL: Do you see a risk of megalomania in India?

Tata: I don't think it will ever get that far, but there is always the possibility. In the end, it depends on the people in charge.

SPIEGEL: Of course it's not just individual managers who could overestimate themselves. India's economy also could overheat.

Tata: I think our current growth rates are steady. We are concerned that the economy could overheat quickly. A massive increase in consumption could lead to inflation, which would not be good at all for our country. But India has never seen as much investment as today -- even if it is less than in China.

SPIEGEL: What do you see as the strengths and weaknesses of your country when compared to China's booming economy?

Tata: The political system of the People's Republic of China can make things easy. Decisions are made quickly and results come quickly, too. In our democracy, on the other hand, such things are extremely difficult. We like to say that India has the advantage of being a large market. We have provinces, we have the rule of law, we have a system of justice. But those are also weaknesses when compared with China. On the other hand, one of our strengths is that we are very individualistic, and as individuals we are very creative. But that, too, is a weakness, because it keeps us from working well together. Everyone thinks only about his own profit. India has probably lost its position to China as the world's workshop. At the same time it has the power to be ahead of China when it comes to knowledge. Not that the Chinese are far behind. They will get there. But our challenge is to invest sufficiently in education.

SPIEGEL: What have you personally learned from China?

Tata: That the government in Beijing does not think in small steps. They think globally. And those who take that approach also tend to come out ahead. I have also made this a point in our company: We need to stop taking baby steps and start thinking globally. It really seems to be helping.

SPIEGEL: You yourself studied in the USA. But you studied architecture instead of business administration or law.

Tata: I think you should study what you like best. Originally I wanted to be an architect, which for me had less to do with art than with a desire to build something. Later on I found it great to build cars, for example, or develop businesses. But when I finished my degree in architecture, I had no plans to return to India or to become part of the Tata Group. That I am here today is really by chance.

SPIEGEL: What is real luxury for a wealthy businessman like yourself?

Tata: Time. I would say having time for a private life is my biggest luxury. In the little time I have for myself, I have so many interests. I love to read, I love to design. If I ever retire, I want to create a small design group where I can simply develop products for fun, not because they have to become profitable. I enjoy thinking about impossible things, and how I can perhaps actually make them possible.

SPIEGEL: And you don't consider your passion for super-sonic jets a luxury?

Tata: That’s just fun. I was 17 when I got my pilot's license and since then I have always flown. It's a fantastic thrill. Not long ago at a Lockheed air show, I was invited to fly an F-16 and I didn't have to think about it for more than 10 minutes. Then Boeing came with a similar offer -- and I took it too. Flying is simply exciting. If there is anything I really regret, it is that we don't have an aircraft sector in our portfolio.

SPIEGEL: You are now 69 years old. Tata changed its rule that company managers have to retire at age 70 just for you. Now you have six years left to find a successor. Does it have to be an Indian?

Tata: In the entire group, there has never been a non-Indian as chairman of the board nor even on the board of directors. But the firm is changing in many areas and we shouldn't attach too much importance to the question as to whether the next company head has to be Indian or not. At least that's how I see it. But perhaps India hasn't reached that point yet. Hiring a non-Indian would provoke a lot of public criticism. But we should not close ourselves off as a company to the possibility that someday the head of Tata might not be Indian.

SPIEGEL: Mr. Tata, thank you for taking the time to speak with us.

Interview conducted by Padma Rao and Thomas Tuma

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