A valuable legacy: Ratan Tata built a cohesive, forward-looking group

Ratan Tata's transformative leadership steered the Tata Group through challenges and globalization, reshaping it into a cohesive powerhouse

Ratan Tata presided over India’s largest corporate group for over two decades and left it in better shape than the disparate conglomerate of 34 listed companies and myriad unlisted ones he inherited from J R D Tata in 1991. Though the bulk of the group’s revenues and profits remain reliant, as they did before his appointment as chairman of group holding company Tata Sons, on the Big Three of Tata Consultancy Services (TCS), Tata Motors, and Tata Steel, Ratan Tata left the sprawling group he inherited on the cusp of economic liberalisation as a cohesive and forward-looking entity. Set against the diminution of other prominent family-managed conglomerates that similarly flourished in the licence-permit era — the Modis, Singhanias, Ruias, and sections of the Birlas, for instance — the group’s longevity is no small achievement. Before he took charge, Ratan Tata had not demonstrated any noticeable business acumen during his stint in Nelco. His tenure began with multiple trials by fire — pushback from powerful satraps and the outbreak of the largest strike at Tata Motors’ Pune unit. He managed both challenges with low-key efficiency and turned his attention to streamlining and consolidating the group by exiting businesses in which he saw no competitive advantages, such as cosmetics, personal care, pharmaceutical, computer hardware, and cement.

By the turn of the century, Ratan Tata sought to reorient his domestic-focused group towards global markets, with mixed results. His headline-grabbing acquisitions of Anglo-Dutch Corus Steel in a high-stakes auction in 2007 and Jaguar-Land Rover in 2008 ahead of the global financial crisis strained group finances. But the serial big-ticket buys undoubtedly globalised the group far more than most peers. His focus on avionics and mobile component manufacturing added a forward-thinking element to the group. In managerial style, he displayed all the dichotomies of a corporate scion. Some of his more audacious bets could only have been taken by an owner rather than a professional manager with an eye to quarterly results. Among them was the promise to build and sell a car for under Rs 1 lakh. Yet, the Tata Nano, launched in 2008, proved to be a failure. Poorly engineered, it was no match for the formidable competition in the small car market at the time and was discontinued in 2018. His decision to reorient Tata Motors, India’s largest truck manufacturer, towards cars also pulled the company into losses for a while until better-engineered and branded products made it India’s second-largest carmaker. The impact on the group’s fledgling aviation business after acquiring loss-making government-owned Air India, for which Ratan Tata provided the impetus before he retired, is still unclear.

Unlike other Indian groups, circumstances had compelled the Tata group to rely on professional managers. This outcome ensured that the group was relatively efficiently run but left it without organisational checks and balances on risk-taking; for all his manifest charm and charisma, Ratan Tata was known not to appreciate criticism. His clash with the late Cyrus Mistry, the first non-family group chairman, who succeeded him in 2013, underlined this weakness. Mistry briskly set about undoing some of Ratan Tata’s more ill-judged decisions with a frankness alien to Bombay House culture. His abrupt dismissal did not enhance Ratan Tata’s reputation for transparency, though the move did underline the power of the Tata Trusts, which own 66 per cent in Tata Sons. But no one can doubt that from an unpropitious start three decades ago, Ratan Tata has undoubtedly left his successor a valuable legacy.