MARCH 31, 2002
 Cover Story
 Personal Finance
 Case Game
 Back of the Book
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Stanley Fischer Unplugged
He has the rare distinction of having advised through the half-a-dozen economic crises of the 90s. But now economist Stanley Fischer is calling it quits at the International Monetary Fund, and joining Citicorp as Vice Chairman. In India recently, Fischer spoke on IMF, India, and the global recession.
More Net Specials
Tata Transformed
Over the last 10 years, Ratan Tata has quietly entered 15 new businesses, exited 11, and herded the rebellious Tata companies into a cohesive group. Tata now wants to double revenues every four years, and profits, every three. His secret weapon: branded products and services.
Ratan Tata

At the shareholders' agreement signing ceremony for VSNL in Mumbai on February 13, 2002, Ratan Tata was his characteristic quiet self. Even as the Information Technology minister Pramod Mahajan urged the audience-comprising, among others, Kumar Mangalam Birla of the A.V. Birla Group and Rajeev Chandrasekhar of BPL-for more aggressive play in the government's disinvestment programme, Tata sat poker-faced at one end of the dais. He had plenty of reasons to let on a smile, though. After all, a giant was stirring.

Interview: Ratan Tata
Tata By The Numbers
Tata's Telecom Plan
Funding The Future

The Rs 1,439-crore purchase of a 25 per cent stake in Videsh Sanchar Nigam Ltd (VSNL)-the biggest disinvestment deal so far-gives the Tatas a 100 per cent share of the hitherto monopoly international long distance market, and a leading share of the internet services market. Earlier, the closely-held Tata Consultancy Services had acquired another state-owned company, CMC, consolidating its leadership in the retail banking solutions business, and thus edging closer to the $1-billion (Rs 4,700 crore) revenue mark-the first for an Indian software company.

There are reasons for jubilation in other parts of the group as well. Tata Engineering seems to have overcome quality problems in its small car Indica with a new v2 version, which is moving the metal like never before; in January, the company also unveiled a 1.4-litre sedan built on the same Indica platform, adding another car to its lonesome portfolio. And Tata Steel, despite the global slump in the steel industry, managed to emerge stronger after three years of intense restructuring and downsizing. Today, it is one of the lowest-cost steel producers in the world.

Since 1997, Tata Steel's stock price has halved to Rs 104, and that of Telco to Rs 133 from Rs 400

The two-year-old acquisition of the British tea brand Tetley is already making financial sense. In the current fiscal, the company upped its marketshare in the UK by 4 percentage points to 23 percentage points, and gross profits by a staggering 34 per cent. It now appears that the Tatas' £270 million (Rs 1,890 crore) investment in Tetley may start yielding returns ahead of schedule. Morale in the group is, understandably, sky high. ''It's like a surge of electricity going through the group,'' says R.K. Krishnakumar, Chairman, Tata Tea, and also a director on the board of Tata Sons, the group's holding company.

TATA's Diktat

Globalise: With economies opening up, Tata companies are aiming for global benchmarks to compete.
Be Skill-Intensive: With manufacturing ceasing to be India's advantage, the thrust is on knowledge-based industries.
Build Brands: Shift from selling commodities to marketing branded products and services that not just differentiate but fetch a premium.
Leadership: To justify shareholder interest, Tata companies must be among the top three in their industries.
Enhance Performance: Executives must pull their weight, and the best of them must get opportunities across functions and group companies.
Push Growth: Double revenues every four years, and net profits, every three. Size matters.

The Takeoff

That surge of electricity-not unnoticed by merchant bankers, now crawling all over Bombay House, the group headquarters-is in fact the spark that the group was looking for to rocket itself into a new orbit of growth. In 1991, when a shy and reclusive Ratan Tata took over the chairmanship of the group from uncle J.R.D. Tata, his priority was not new businesses or even growth. It was something much more immediate-and arduous. It was to turn a loose confederation of companies, controlled zealously by powerful satraps, into a group that thought and acted like one. The challenge, however, wasn't merely of ousting powerful chieftains like Russi Mody of Tata Steel, Ajit Kerkar (Indian Hotels) or Darbari Seth (Tata Chemicals). In most companies, including Tata Steel and Tata Engineering, Tata Sons' holdings were precariously low.

That's possibly why while relatively upstart groups like Reliance, Videocon and even Essar were expanding their businesses in the 90s, the Tatas were busy trying to herd their flock together. ''From the outside (that) may not look very much, but I think the first phase of what we were trying to do was to create an integrated group,'' says Tata, who uncharacteristically has even acquiesced in the hiring of a new agency for some hi-decibel pr.

"Given that a third of the portfolio has been reviewed, it would seem that the group has been at it"
, Executive Director, Tata Sons

Still, the 95-company, 2.25-lakh employee group does appear a lot different from what it was a decade ago. In that time it has forayed into at least 15 new businesses, and exited 11 (See Tatas By The Numbers). That means a third of the group's businesses have been churned over since Tata took over. The strategic tenor has changed too. For one, there is a shift happening from commodity businesses to brand-led products and services. Consider: brand businesses fetched about a fifth of sales and profits in 1990-91; today, they account for half of the revenues and 58 per cent of net profits. ''The fact that one-third of the portfolio has been reviewed would imply that in some mysterious way (we) have been at it,'' says R. Gopalakrishnan, Executive Director, Tata Sons.

The new business realities have also made the historically benevolent group clinical in its business strategy. Over the last 10 years, product lines that showed no promise of becoming segment leaders were dispensed with. Even today, there is a lot more scope for sell-offs, considering that about half-a-dozen companies fetch 85 per cent of the topline and 90 per cent of the profits.

The decade-long restructuring has helped Tata streamline the group along seven business segments: engineering, chemicals, communications and information systems, materials, consumer products, energy, and services. A Group Executive Office (geo) interfaces between the principal shareholder (Tata Sons) and individual companies, while 14 business review committees set the strategic agenda for each of them. The performance goal, as set by Tata, for these businesses is simple: to double sales every four years and profits, every three.