Mon, Feb 25, 2008 page10

• FEATURE: Tata defies skeptics to become international leader

  BUSINESS WITH HEART No Tata family members are among India's list of billionaires because much of the conglomerate's income is channeled into various philanthropies

  • AP
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  A dozen years ago, many believed that India's Tata Group -- the country's oldest and largest conglomerate -- was a bloated behemoth that would eventually go under.

  Instead, it has become a powerhouse in the 21st century, focusing on core businesses like steel and automobiles and seizing opportunities, including the hugely profitable outsourcing business that came with India's dramatic economic transformation.

  A slew of recent acquisitions, including Britain's Tetley Tea and Boston's Ritz Carlton Hotel, have thrust the Tata conglomerate -- which comprises 98 companies and was largely unknown outside India until recently -- into the global spotlight.

  

  Tata Group chairman Ratan Tata poses next to the newly launched Tata Nano at the ninth Auto Expo in New Delhi, India, on Jan. 11. Tata Group has become a powerhouse focusing on steel, automobiles and the hugely profitable outsourcing business that came with India's dramatic economic transformation.

  PHOTO: AP

  A year ago, Tata Steel Ltd became the world's sixth-biggest steelmaker when it bought Britain-based Corus Group for US$13 billion. Then last month, Tata Motors Ltd grabbed the world's attention when it unveiled the planet's cheapest car: a US$2,500 four-seater that could change the global auto industry.

  Surprising naysayers, the company has also been named the preferred bidder for Ford Motor's Jaguar and Land Rover businesses.

  "We have been thinking bigger than we have done in the past," said chairman Ratan Tata, 70, in a rare interview at Bombay House, the group's headquarters since 1926. "We have been bolder ... and we have been more aggressive in the marketplace."

  In five years through last March, annual group sales more than doubled to US$29 billion, while market capitalization of its 27 listed companies increased six-fold to US$78 billion. The numbers do not include Corus, whose sales totaled US$19 billion in 2006.

  While recent rapid earnings growth at Tata Steel and Tata Motors has slowed, net profit at Tata Consultancy, India's biggest outsourcing company, continues to rise, climbing 21 percent in the fourth quarter of last year.

  The globalization strategy will only get bigger, Tata said.

  "We are at an early stage," he said. "We are still feeling our way."

  The resurgence of the 140-year-old Tata brand is as much a story of the country's economic rise as it is about the success of the chairman, whose ascent to the top job in 1991 coincided with the beginning of India's shift from a socialist-style state to a market economy.

  For decades after India's independence from Britain in 1947, the government fixed prices, imposed curbs on foreign capital and set limits to what a company could produce. The restrictive regime stifled growth and bred corruption.

  The Tata Group was hit harder than others because it strove to create a business culture that emphasized transparency and integrity. Tata executives are known for refusing to pay bribes and their lifestyles are mostly modest.

  Tata, a bachelor, lives in a beachfront Mumbai apartment and is driven to work in an inexpensive Tata sedan.

  When he took over the company from his gregarious uncle, J.R.D. Tata, the Tata Group was almost falling apart.

  J.R.D. Tata's hands-off approach had led to squabbling among top executives.

  After Ratan Tata became chairman, it took him years to clean up the mess from power struggles, pushing out a generation of executives and jettisoning peripheral businesses.

  Just as the group's fortunes were reviving, the Indian economy hit a slump, in 2002. That's when Tata began to look overseas.

  What followed was a massive push to acquire businesses abroad. Nearly 30 overseas buyouts have helped the group's international revenues grow fourfold to US$11 billion.

  For all that, Ratan Tata insists he hasn't traded off the group's long cherished values.

  No Tata family members are among the country's growing list of billionaires because the family business is owned mostly by Tata-funded charitable trusts.

  A substantial portion of the group's income is channeled into various philanthropies that have helped build some of the country's finest institutions, including India's first cancer hospital.

  Tata companies are also known for offering worker benefits that are rare in India, including pension and child care allowances. Tata Steel hasn't seen a strike in 50 years.

  "The one thing I had always felt is that I wanted to go to bed at night saying I had not succumbed to the temptation of giving up the values and the ethics, that the group had been built on," Tata said.
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