Ratan Tata's undying legacy: How one man transformed the Tata Group into a global business empire

“Why are we making these small acquisitions?” he asked about a deal worth a sizeable $285 million. It was a clear indication that RNT desired to make the company a global force to reckon with. “Let’s do something bigger,” he said then. Three years later, it became clear just what RNT meant. Tata Steel acquired Corus, which was four times its size, for a whopping $12 billion after an intense bidding battle. With that one stroke, it became the largest outbound buyout by an Indian company. That and other foreign acquisitions made clear that RNT’s vision stretched much beyond India’s borders.

But it was not always so. By the late 1980s, there was speculation about the successor of the legendary J.R.D. Tata, who had headed the group for half a century. Many names did the rounds, including that of Nusli Wadia, the promoter of Bombay Dyeing, apart from several professionals. At that point, RNT was heading Tata Industries. It had not been a remarkable career—before Tata Industries he had helmed NELCO, which manufactured electronics—but he was J.R.D.’s preferred choice.

When RNT entered the corner office at Bombay House in March 1991, he could not have known that gaining acceptance within the group would be difficult. He had to weather many a storm, from a showdown with unions to bringing powerful ‘satraps’—who headed some group firms—to heel. He also consolidated his hold over the group, which operated like disparate companies glued together only by the personal charisma of J.R.D. Tata.

After those initial travails, he set about stamping his imprint on the storied conglomerate, making it a force to reckon with in sectors like auto and IT services and has now ventured into sunrise sectors like electric vehicles and semiconductors, and returned to civil aviation.

RNT, who passed away on October 9, leaves behind a conglomerate that had revenues of $165 billion in FY24 and has a decidedly global outlook.

Reining in the Satraps

In 1991, it looked like RNT had walked right into a storm. The old satraps—most prominently, Russi Mody of Tata Steel, Tata Chemicals’ Darbari Seth, and Indian Hotels’ Ajit Kerkar—refused to accept his leadership. It was a very different situation from when J.R.D. was in charge. “He was a statesman to the satraps, and their loyalty to JRD was viewed as loyalty to the Tata group,” says an executive from that era. Besides, the group had several disparate companies running their businesses almost in isolation. “These were created at a different time, and it seemed logical for the successor to create an integrated entity.”

For example, Tata Steel had a cement plant since it threw up slag, a vital raw material. But there it was in competition with group firm ACC, which was the second-biggest company in that sector at the time. “The satraps had their own jurisdiction and were very happy that way,” the person says.

The lack of cohesion was, perhaps, most plainly visible in the Tata logo. There was a group logo, but it had several versions depending on the company using it. RNT, who was 53 when he took over, knew an overhaul was needed.

“By all accounts, there was no personal animosity between Ratan Tata and the satraps. The fact is that all the Tata firms had to be consolidated under a common brand name and values,” says Sonu Bhasin, an independent director, family business historian, and author.

The satraps were extremely competent but had their own sets of rules. The situation had to be rectified. “Slowly, each of the satraps was removed—Mody through a retirement policy, followed by Seth, who stepped down voluntarily, while Kerkar was voted out by the board.” That strengthened RNT’s hold on the group. He also increased Tata Sons’ holding in various group companies—it was less than 3% in Tata Steel and Tata Motors when he took charge.

RNT took over at a time when the Indian economy was in a deep crisis. Just as the country began to set its house in order and dealt with the balance of payments crisis, so did RNT in resetting the balance of power within the group.

Part of that process was taking several hard decisions. Tata Oil Mills Company (TOMCO)—with brands like Hamam, Moti, 501, and OK—was sold to Hindustan Unilever. Likewise, ACC was sold to Gujarat Ambuja. The group sold its stake in Goodlass Nerolac to Kansai Paint Co. of Japan and exited from the computer hardware business.

Jitender Balakrishnan, a former director on the board of Tata Steel, says RNT was a “risk-taker,” but only if he was convinced. RNT was deeply driven by the dream of every company in the Tata group having a global presence, adds Balakrishnan.

Going Global

By the end of 1999, a brand new Tata group logo, designed by London-based brand consultancy Wolff Olins, was unveiled. The blue and white logo helped consolidate RNT’s position as the unquestioned leader. The following year, Tata Tea, quite audaciously, bought London-based Tetley Tea for $450 million. This was a statement of intent—the deal value was four times Tata Tea’s net worth, and it was the biggest cross-border acquisition at that point and marked the first instance of a leveraged or debt-financed buyout by India Inc.

The objective was to have operations outside India, and scale, RNT realised, was key to success. Over the next decade, the group acquired more foreign companies, starting with Tata Motors’ purchase of Daewoo’s commercial vehicles business and later Jaguar Land Rover from Ford, but nothing was as big as Tata Steel buying Corus for $12 billion.

“He was not an immediate convert to economic reforms,” says Vallabh Bhanshali, Co-founder and Chairman of private equity firm Enam Group. The globalisation of the group took place later, and “one really saw the gradual evolution of the man in the new business scenario,” Bhanshali adds.

The messaging was clear—the group was no longer just a domestic giant. “The acquisitions of Jaguar Land Rover, Tetley Tea, and Corus stand as milestones, not just in expanding the group’s reach, but in positioning Indian companies on the global stage. These deals allowed RNT to diversify the group’s revenue streams and, more importantly, shifted perceptions of Indian businesses,” says Sougata Ray, Thomas Schmidheiny Chair, and Professor of Strategy & Entrepreneurship Practice at the Indian School of Business.

Of course, those acquisitions came with their own sets of challenges. Corus, for instance, was hit by the collapse of the global steel market after the financial crisis in 2008, severely denting Tata Steel’s finances. As a result, the buyout suddenly looked very expensive.

Similarly, Air India, which was brought back into the Tata hangar in 2022, has come with its fair share of problems, including financial troubles. In FY23, the latest year for which financial data is available with ACE Equity, a corporate database, it shows that while consolidated total income doubled from Rs 22,700 crore in FY22 to Rs 42,239 crore in FY23, losses widened from Rs 9,442 crore to Rs 13,990 crore in the same period.

Challenges Aplenty

Acquisitions apart, some other decisions too did not pan out the way RNT wanted them to. Take the case of Tata Motors’ foray into passenger cars with the launch of the Tata Indica. The initial consumer feedback was negative and pushed the company into the red by Rs 500 crore in FY01.

Ambi Parameswaran, who headed the account at ad agency FCB Ulka at the time, gives credit to RNT for getting to the root of the problem and giving his teams a free hand to fix it. When the Tata Indica V2 was launched in 2001, it became one of the best-selling cars. “It was just his courage of conviction playing out.”

However, such conviction could not salvage the disappointing performance of the Tata Nano, which was priced at just `1 lakh. “It was well-intentioned but a commercially unsuccessful project. The car was designed as an affordable vehicle for the masses, but its branding as a ‘cheap’ car did not resonate with consumers,” says Ray.

For many years, the belief that the group would struggle with B2C business had gained ground, and the foray into telecommunications through Tata Teleservices confirmed that. A joint venture with Japan’s NTT Docomo turned sour, and a legal battle ensued before the group bought out the foreign partner’s stake. Later, the loss-making business was sold to Bharti Airtel.

And yet, for all the challenges, there are also the big moments, like the listing of Tata Consultancy Services in August 2004. The original big boy of the IT industry saw widespread investor interest and since then has contributed disproportionately to the group’s finances. Even in FY24, its share in total income across the group’s listed entities was 22% and only second to Tata Motors, but it accounted for 50% of the net profits recorded by the group’s Top 10 companies. By the looks of it, TCS’ role in bolstering the group’s finances is unlikely to change anytime soon.

The Mistry Saga

Through RNT’s time as the patriarch of the group, many attempts were made to find successors. An example is Dilip Pendse, once RNT’s protégé, who headed Tata Finance. He was accused of routing deposit holders’ money to the stock market. “He trusted people, and when they let him down, he took it personally. The relationship would then go to the other extreme,” says another executive who worked closely with him.

But nothing generated more controversy than the sudden ouster of Cyrus Mistry as Tata Sons’ Chairman in October 2016. After being handpicked by RNT, Mistry, whose family owns 18.4% of Tata Sons, succeeded him in 2012, only for his term to be abruptly cut short four years later. RNT then came in as interim Chairman before N. Chandrasekaran—then the TCS boss—was given the top job.

The battle between Mistry and Tata Sons was played out very publicly and in courts after he was removed from the chairmanship of Tata Sons, and then various group companies. At the heart of the issue was the power exercised by Tata Trusts, which has a 66% stake in Tata Sons, the group’s principal investment holding company. “In a sense, they are the ‘owners’, and thus, logically, have a role to play in setting the group’s direction,” explains Bhasin. Mistry had said that he did not have a free hand and there were many points of disagreement with Tata Trusts.

An amendment made to Tata Sons’ articles of association in 2022 has ensured that one person cannot be the Chairman of both Tata Trusts and Tata Sons. RNT was the last one to have held both posts.

Now, with the appointment of RNT’s half-brother Noel Tata, 67, as Tata Trusts’ Chairman, the succession seems clearer. Noel Tata has run Trent competently, apart from now being on the boards of Voltas, Titan, and Tata Steel, among others. Those who know him say he is a “person who works through consensus”. According to eminent lawyer Homi P. Ranina, the trustees have ensured a smooth transition and continued focus on the group’s growth. “It is also to avoid any kind of conflict between Tata Sons and Tata Trusts that one saw earlier.” Noel Tata’s three children are also involved at the group level—daughter Leah is with Indian Hotels, while Maya worked on the launch of the Tata Neu app, and son Neville is with Star Bazaar.

The group’s focus on big-ticket capital expenditure plans is set to continue. Early last year, Chandrasekaran outlined an investment of $90 billion over the next five years across existing and new businesses—the latter including EVs, batteries, renewables, 5G, electronics, and semiconductors. Tata Power and Tata Steel will invest $10 billion each, while Tata Motors and JLR will invest $25 billion.

Ketan Dalal, MD at advisory firm Katalyst Advisors, says Noel Tata’s role in the meteoric rise of Trent and other companies he has been associated with will be a plus. “It is particularly relevant not only in the context of navigating a complex group that is making huge investments, but also in one of the most turbulent and difficult geopolitical periods in world history.”

Of course, Air India is still a concern. Deven R. Choksey, Chairman and MD of wealth management and investment advisory firm DRChoksey Finserv, says it is encouraging to see that losses are reducing. Considering the group’s deep resources, the new-age businesses must be given seven to eight years before profits flow in, he says. “Larger entities like TCS, Tata Motors, Tata Steel, Titan, and Indian Hotels are on autopilot, allowing the group to focus more on the newer pursuits,” Choksey adds.

It is over now to Noel Tata and Chandrasekaran to ensure that the growth engines continue purring and all challenges are navigated with dexterity.

@krishnagopalan