Has Noel Tata done enough to step into Ratan's shoes?

These aren't the results of a dipstick survey conducted by Business Today when writing this feature on Noel Naval Tata, whose prominence is inversely proportionate to the expectations riding on him. Rather, this is an opinion poll on a web page that proclaims to be "the unofficial website of Noel Tata by fans".

At the time of writing, the number of viewers who had taken the poll was a little over 200, more than three-fourths of whom clearly see Noel as a logical heir to Ratan Naval Tata, whose tenure as Chairman comes to an end once he turns 75 in 2012 (there is a slim chance of RNT still being the man calling the shots after that by virtue of his control of the trusts that control Tata Sons).

Do you think Noel N. Tata will be the next head of the Tata Group? Yes..............77.7% No...............17.3% Can't say...5%

Along with the poll, the website carries links to a biography of Noel, as well as a profile and news on the company he runs-organised retailing major Trent Ltd.

A fan club for an incredibly low-profile and selfconfessed introvert may seem as improbable as the US President winning a Nobel Peace Prize, but then even that's happened now. A fan club is also embarrassing for the 53-year-old Tata ("if it flatters, that's the end of me," he quips), who defies the image of the conventional corporate honcho in pinstripes. For starters, he avoids suits, blazers and even ties (he reluctantly agrees to knot one for photographs for BT, even as he lets on that he's more at ease in half sleeves).

Then, he shuns the CEO cocktail circuit, is quick with his "regrets" on RSVPs to corporate dos, is usually last-in-firstout at any group shindig that calls for the presence of Tata company CEOs (like the launch of the Tata Nano car, for instance)-and, best of all, for a head of a close to Rs 1,000-crore company, he's refreshingly downto-earth. Those who know him well say he is happy to stay at company guest houses when on office tour and, according to one friend, "he will always look to spend less if it is possible."

Noel Naval Tata Age: 53 Son of: Simone (Dumoyer) and Naval H. Tata. Half-brother of: Ratan Naval Tata. Also is: Son-in-law of Pallonji Mistry, the single-largest shareholder in Tata Sons outside the Tata Trusts. Education: Bachelor's degree in Arts (Economics) from the University of Sussex, UK, and International Executive Programme from INSEAD, France. Career: Started with the Tata Group at Tata International (then Tata Exports). Current mandate: As Managing Director, Trent Ltd, he has been leading Trent's foray into fashion retail, hypermarkets and books and music since 1998. Other directorships: On Board of Tata companies Voltas and Titan, as well as Tata Investment Corporation, and non-Tata companies like Kansai Nerolac. Vision: To be the most-preferred and consistently profitable lifestyle retailer. Master stroke: To focus on profitability (rather than scale) and on private labels right from the beginning. Strength as a leader: A mirror image of the Tata Sons Chairman in style and manner; seen as very approachable within the Group and outside it; has ability to hold on to key people. Perceived weakness: Not a big risk-taker, not focussed on growth or scale. Biggest challenge so far: The first four years of Trent, when profitability was a stuggle.

You're more likely to see him in the driver's seat of a Tata Safari than being driven around in a fancy sedan. Noel loves driving-fast-but, perhaps, the only time he gets to indulge is once his six-and-a-half-day week is done. Don't be surprised to see him, along with a couple of his Trent colleagues, driving out of Mumbai early morning to neighbouring Pune or Nashik on "site visits" as they look around for potential locations to put up their stores.

Himanshu Chakrawarti, COO of Landmark, Trent's books and music subsidiary, says that it is immensely possible to catch Noel in the corridor to bounce a few ideas off him. K.M. Bharuka, Managing Director of Kansai Nerolac, on whose Board Noel is an Independent Director, adds: "He is very approachable by nature, not just for me, but also for junior members of our team who feel they can seek advice from him."

For a man who's the only Tata (apart from RNT) in the close-to-100-company Tata Group at a director level, such unfussiness is remarkable (RNT's younger brother by two years, Jimmy Tata, had worked in various Tata companies; he retired in the '90s). Also, at 53, Tata is now one of the more senior CEOs in the Group after a recent spate of retirements (see The Bombay House Shuffle). And if you consider that he is the son-in-law of Pallonji Mistry, who owns roughly 18 per cent in Tata Sons, making him a larger shareholder than RNT himself, Noel should be blazing a trail at Bombay House.

Those who ask Noel whether he considers himself an heir to RNT are inevitably greeted with a standard reply: "That's not for me to decide." He is unwilling to be drawn into a discussion regarding his chances of getting the top job at Tata Sons.

Tata Sons' directors, too, were unavailable for comment, but those who have observed Noel closely feel he has a fair shot at the big cheese. "Noel Tata represents the Tata Group on the Board of Titan. He brings the Tata aspect to Titan. He takes a long-term view on everything… He is well-qualified (to lead the Tata Group)," says Bhaskar Bhat, Managing Director, Titan Industries.

Noel, for his part, is focussed on what he knows best, and what he thinks he does best: The retailing business of Trent, with its fashion & lifestyle stores, hypermarkets and books and music outlets. "Retail is detail," is one of his favourite mantras, and sure enough, for the past decade, he's been eating, drinking and living (often out of his suitcase) the retail story. "You can't escape retail-not even when on holiday-it's all around you," he quips.

The moot point, though, is that even if Noel has given his best shot, is it enough- enough to make him a successor to RNT? That's not an easy question to answer.

Critics - a few of them within Bombay House-have, in the past, raised eyebrows about Trent's arguably slow pace of growth. They point out that even as Kishore Biyani (who had only a couple of Pantaloon stores when Trent started) has raced ahead to become a Rs 7,669-crore in revenues Goliath (in the recently concluded fiscal). Trent, which began in 1998, has still to cross Rs 1,000 crore (it expects to hit Rs 1,200 crore by the end of the current fiscal).

Sales Rank	Company	2008-09 Sales	Daily Market Cap*	Market Cap Rank
1	Tata Steel	1,50,041	42,594	2
2	Tata Motors	78,053	26,423	4
3	TCS	27,821	1,12,159	1
4	Tata Power	17,522	30,923	3
5	Tata Chemicals	12,329	6,571	6
6	Tata Communications	9,978	13,455	5
7	Tata Tea	4,850	5,465	9
8	Voltas	4,374	5,175	11
9	Titan Industries	3,957	6,110	8
10	Indian Hotels	2,601	5,386	10
11	Tata Teleservices (Mah.)	2,045	6,270	7
12	Tata Coffee	1,116	670	16
13	Tata Metaliks	1,109	255	22
14	CMC	939	1,697	12
15	Rallis India	924	1,090	15
16	Trent	846	1,304	14
*As on Oct. 8, '09               Sales, daily market cap figures in Rs crore

Even Johnnies-come-lately like Aditya Birla have crossed Trent in turnover (as have Lifestyle and Shoppers Stop).

What's more, Trent seems to have missed the bus in the market that matters most-food and groceries, which constitutes 60 per cent of the organised retail pie. True, in fashion, with Westside, Trent is running virtually neck-andneck with Pantaloon in terms of number of stores (40 as against Biyani's 44), but in the business of hypermarkets, Noel seems to have left it for too late-Trent has just four hypermarkets as against Biyani's 116 Big Bazaars.

That, of course, is just one half of the story-which Trent officials will stress is the superficial half. Noel himself is at pains to point out that just scale isn't enough in retail. What matters is profitability, and if Trent has been conservative in growth, it's because profitability always took precedence over growth. It is only after the Westside stores (fashion & lifestyle) had stabilised and started making money that Noel decided to venture into hypermarkets. Although one section of analysts believes that Trent might have dilly-dallied, Noel sees the retail story as a marathon. "The size of this sector (hypermarkets) would allow each of the top five players to build a business in excess of Rs 20,000 crore over the next 20 years," says Noel.

Noel's focus on profitability doubtless seems a stroke of genius against the backdrop of an economic slowdown, at a time when demand for organised retail had dipped by close to 20 per cent (last fiscal). Trent is today the more profitable retail operation, with almost everybody else reeling under huge losses and debt. "We want to be the best, not necessarily the biggest. And it will be the customer who decides that. If in the process we end up becoming the biggest, great. If we don't become the biggest, that's fine too," says Noel. Adds Gaurav Mahajan, Head (Buying), Westside. "I like to say that the (second) N in Noel's name stands for Nostradamus because he was able to foresee that private labels and profitability are the two Ps that matter most in organised retail."

Will the wise men at Bombay House look into the "detail" of Noel's leadership and operational skills, or would they prefer to just look at the broad numbers? The latter won't work too well in Noel's favour. Trent, after all, ranks at a distant #16 in turnover amongst Tata companies (and #14 in market value as of last fortnight).

What's more, Trent doesn't seem to be the only vehicle for organised retail in the Tata Group, indicating, perhaps, that Bombay House felt newer vehicles were needed to hasten the Tatas' retailing thrust. Noel, though, feels it's unfair- as is wont in India-to paint all of organised retailing with one brush. Consumer durables retailing, for instance, he says, is a very different business from fashion or hypermarkets, and so needs a different focus.

The Tatas flagged off Infiniti Retail, which owns the brand Croma, for this purpose.

Indeed, it's only when you combine the Tatas' overall retailing reach-which goes much beyond Trent-that it looks formidable. "If you look at the retail operations of the Tata Group, they are probably the biggest in India, with Trent, Croma, Titan, Tanishq, Voltas, Tata Indicom and Tata Motors," says Ajit Joshi, CEO, Infiniti Retail.

Successful Succession?

What's going for Noel… The Tata name. He will be one of the senior CEOs in the Group after the recent spate of retirements. Age: At 53, he can go on for another 22 years as Chairman. His tortoise act with Trent that made sure the company remained profitable and growing even as many hares in retail bit the dust. He has built a business from scratch-something that few CEOs of the day in the Group have. He is a chip off the old block, in many ways an image of Ratan Tata. He is the son-in-law of Pallonji Mistry (Pallonji's son Cyrus is on the Tata Sons Board), who owns roughly 18 per cent in Tata Sons.

…and what's going against him. Pallonji's roughly 18 per cent may not matter so much as Ratan Tata himself controls 66 per cent of Tata Sons by being at the Head of the trusts. Noel heads a company that isn't in the top league of Tata companies. In contrast, Ratan had stints at Tata Motors and Tata Steel. Noel Tata is not on the Board of any of the larger Tata companies like Tata Steel or Tata Motors. The Tata Sons Board may want Ratan Tata to carry on. The company he heads is less than Rs 1,000 crore in sales-ranks 16th in sales (and 14th in market cap). Questions have been asked about the pace of growth at Trent.

But let's not forget that Noel has nurtured Trent right from start-up stage-an opportunity few Tata CEOs have got. Says Rajiv Gujral, COO & Vice President (M&A), Indian Hotels Co., who is a close friend of Noel: "I admire Noel's vision and leadership, which have guided and taken Trent to another level, and also created great value for the stakeholders." Adds C.G. Krishnadas Nair, Managing Director, Cochin International Airport, who is an Independent Director on Titan Industries: "Noel Tata is very capable of leading any business. He very much represents the Tata tradition-and the values inculcated right from the time of Jamsetji Tata to Ratan Tata."

Noel Tata's biggest influences His father, Naval H. Tata "He showed me how to reach out to people Ratan Tata "For his steadfastness in matters of principle, and for his ability to see long-term opportunities and to endure the short-term pain that is sometimes associated with them N.A. Soonawala Vice Chairman, Tata Sons "For his financial advice, his sense of balance and his ability to gauge stakeholder reaction to corporate decisions The Tata brand "My biggest influence-for the respect it draws everywhere you go with people you have never ever met before"

What would work in Noel's favour-and, in fact, anybody else who succeeds the current Chairman-is that the Tata Group has much more method today to it than in the early '90s when RNT took over. Major companies like Telco and Nelco were in the wars, and it didn't make RNT's task any easier that group satraps like Russi Mody (Tisco, now Tata Steel), Darbari Tata (Tata Chemicals), and Ajit Kerkar (Indian Hotels) had to be delicately brought in line. These men were institution builders in their own right, yet when JRD stepped down in 1991, the next man with the Tata surname was seen as the logical successor in most quarters.

RNT's successor will not have to grapple with power centres, although there promises to be a healthy tussle for the top spot amongst a shortlist of seasoned achievers. R.K. Krishna Kumar, Director, Tata Sons, may have a shot at the top position, although that may be at best a stop-gap arrangement as he is 71. Recently-retired CEOs at mainline Tata companies like B. Muthuraman (Tata Steel) and S. Ramadorai (TCS) could get into the fray once they're elevated as Directors on Tata Sons' Board. A dark horse could be Cyrus Mistry, son of Pallonji Mistry, who is already on the Board. Of course, you can't rule out Tata Sons opting for an outside CEO-a high-profile global achiever, to boot.

Noel wouldn't be able to hold a candle to such stalwarts. He isn't on the Board of any of the frontline Tata companies. Also, his experience is almost totally restricted to retail. In contrast, RNT had stints with Tata Steel, Nelco, Central India Textiles, was made Chairman of Tata Industries (the second Tata promoter company after Tata Sons), and also became Deputy Chairman of Telco in 1988 before becoming the Tata Sons Chairman. The good news for him is that at 53, he has, along with the Tata name, age-as well as a solid exposure to a sunrise business whose best days have yet come-on his side.

Additional reporting by K.R. Balasubramanyam