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February 17, 1999

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The Rediff Business Interview/Ratan Tata

'The legacy I'd like to leave behind is of an institution where shareholder value will be enhanced consistently'

The Tata group is in transition. Consolidation, restructuring and flab-cutting seem to be the guiding posts. In recent months, Tisco has sold off its cement division to Lafarge of France. Telco has launched a small car. The group has adopted a slick new logo. The group has hired some of the best names in industry. And TCS is said to be mulling about going public.

However, the recession and the imminent dawn of a new WTO-governed business regime seem to pose fresh challenges to the group.

In a rare interview, Tata chairman 61-year-old Ratan Tata shared his views on this and more with Sunita Wadekar-Bhargava recently.

Ratan Tata Is the concept of a 'group' relevant in the coming era where each company will be judged on its own merits?

The concept of the group will continue to be relevant for the forseeable future because it is recognised that belonging to a group brings greater value to the company than the cost of the association. We have to ensure, however, that this equation, in fact, works for the companies' benefit.

Good examples here are General Electric and Asea Brown Boveri. An important element of their success has been the fact that they are group and as a group, (they are) so focussed, energetic and innovative that their being a group has brought their individual businesses great advantage. Both these groups have leveraged another critical requirement for businesses, namely size, but have taken care to ensure that the value they bring in being a group is far in excess of the cost.

What is your vision for the Tata group? What does it stand for today and what should it stand for in 2010? Do you envisage a different order in the next century where you see smaller, more mobile, global companies as against the behemoths some of the companies have become? Even companies like IBM, Sears, Wal-Mart had to shed off some of their fat and sell off their 'sick' units as competition intensified in the US in the last decade.

My vision for the Tata group is one which consistently delivers high value for all shareholders. To do that the group must be businesses- and customer-focussed. It must be globally competitive and operate only in those areas where the group's strengths are best leveraged. The internal structure of the group will have to be such that all the group's companies bring maximum value to shareholders consistently or not remain in the group.

Ratan Tata How do you want to build the Tata brand globally, especially given the recent spate of announcements about building up the Tata brand equity in the coming years? Which of your companies would you want to become a global giant? That is, which companies would you want to push to make them truly global players?

The route map for building the Tata brand globally will emerge down the road. At the moment our focus is on restructuring and reshaping the group internally. Tata companies which become global players will be drawn from industries where India is best placed. What these industries are, and therefore which Tata companies in those industries become global players, will take some time to emerge. Critical to this will be the WTO timetable, which will determine the extent of protection for the Indian industry.

Tata Tea, Titan, TCS, Taj Group of Hotels -- all these have the potential to become forces in the world arena. Do you have any different spin on pushing them more aggressively on the world stage?

Some of the companies you mentioned could be among the Tata companies that become global players but it is as yet too early to identify them definitively.

What will success mean to you eventually as you pass on the baton to others? In other words, what would you ideally want your successors or business writers to say about your legacy?

The legacy I would like to leave behind is of an institution and a highly personalised organisation which will be a leader in its fields of operation where shareholder value will be enhanced consistently.

How is the proposed corporate centre with R Gopalakrishnan and others coming up? Have the plans to incorporate a formal business body to carry out speedy in-house planning and implementation borne any fruit yet?

Ratan Tata The restructuring has just about begun and is beginning to pick up momentum. What has been established is a group executive office which has among others, R Gopalakrishnan. We are also working very hard and on several fronts to increase the in-house ability in strategy and planning. The restructuring process is expected to mature fully in about two years time and hopefully by then the group will only have those companies which are globally competitive. In travelling this road the group will look at all practical options including mergers, acquisitions, greenfield projects, joint ventures and disinvestments.

Will manufacturing be de-emphasised in an economy where the service sector will grow faster?

The Tata Group has equally strong capabilities in manufacturing as in the services sector. As such, it will be poised to take full advantage of global economic trends regarding the relative importance of manufacturing and services in an economy.

Ratan TataWhat are your thoughts on the much-publicised debut of the Indica vis--vis the risks and recipe for success you would like to associate with it.

The challenge that the Indica posed to us was to create a world class product by relying on Telco's strengths and capabilities. It is encouraging that the Indica has been received enthusiastically but its eventual success will be defined by its ability to create a market for itself which can withstand the inevitable competition from world class players like Toyota, Honda and the Korean companies.

Is there any chance of the Tata airline project being revived? Civil Aviation Minister Ananth Kumar has squarely blamed the Tatas for abandoning the project without giving the government time for further deliberation. Comment.

The Tata Airline proposal is history. We have said all that we wanted to say on it and we do not wish to comment on this further.

As a member of the PM's Advisory Council, are you satisfied with the present government's commitment to the reform process? Do you think the government is serious about its reforms and liberalisation drive?

In my association with the present government as a member of the Prime Minister's Advisory Council, I have been impressed with the government's intentions regarding the continuation of the reform process. Whether the intentions are translated into action will depend on the government's resolve to overcome resistance from vested interests in the political classes, the corporate sector, bureaucracy and organised labour, which are combining to delay the transition to the critical second stage of reforms.

Ratan There has been a lot of speculation about TCS going public. When is that likely to happen?

The issue of TCS going public is a matter of pure speculation. There is no such proposal.

Do you see NRIs getting involved in the Tata group? Would you consider a planned on-line chat with Rediff subscribers?

I do not see any particular role for NRIs in the Tata group. I would, of course, want a reverse brain drain from the west and for the Tata group to be a major beneficiary of this process. The group has some exciting and challenging plans in information technology, telecommunications, auto components and corporate strategising where it aims to provide fulfilling careers for the best Indian talent wherever it may be.

I would also greatly enjoy interaction like an on-line chat with Rediff subscribers but only after a while, when the pressures on my time ease a little bit.

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