Ratan Naval Tata Part-1

The End of an ERA !!!

He's packing his bags -- again. December 2012, when he turns 75, is the third scheduled retirement for Ratan Tata.

The Tata Group has been at this inflection point twice earlier, and stepped back both times. In 2002, when Tata was to retire at 65, the Tata Sons board promptly redesignated him non-executive chairman, which meant he could continue for another five years.

Three years later, the board upped the retirement age of non-executive directors to 75. The message is clear: Ratan Tata is indispensable.

And it's not just the board that feels that way. There were loud cries of support from shareholders at the Tata Steel AGM in August, held soon after the announcement that Tata Sons had created a panel to find Tata's successor.

"We can't lose our ratan (jewel)," said one shareholder, while others asked him to stay on as chairman emeritus.

Whether or not he acknowledges it openly, Tata must be feeling vindicated by this public recognition of his worth. When he took over as Tata Group chairman on March 25, 1991, critics were loud and unrestrained in their disapproval and scepticism.

Ratan Tata was considered to have gained his position purely on the strength of his surname; he was incompetent, raged opponents both within and outside Bombay House, and he didn't possess an iota of the charisma of his uncle and predecessor, JRD Tata.

Nearly 20 years later, Ratan Tata has achieved almost everything on his 1991 agenda. At Rs 3.46 lakh crore (Rs 3.46 trillion), Tata Group revenue is 40 times the 1991 level, while net profit has gone up four times.

It is the largest Indian multinational conglomerate; more than 65% of the group's income comes from overseas and it has over 100 operating companies (32 listed)  and they have a combined market capitalisation of about $88.82 billion (as on December 20, 2012), and a shareholder base of 3.8 million. The major Tata companies are Tata Steel, Tata Motors, Tata Consultancy Services (TCS), Tata Power, Tata Chemicals, Tata Global Beverages, Tata Teleservices, Titan, Tata Communications and Indian Hotels spread across 85 countries in 6 continents.

In the past decade -- the decade that marked the glorious years of Ratan Tata -- nearly $18 billion was shelled out to acquire 22 companies worldwide, including Tetley Tea and Corus Steel in the UK, New York's Pierre Hotel and Jaguar Land Rover.

The Tata Group includes India's largest private steel company, the biggest auto manufacturer and the largest IT outsourcing firm.

"Ratan Tata outperformed JRD. He toppled people as strong as Russi Mody, thought out of the box and came up with path-breaking concepts like the Nano," says Bala V Balachandran, faculty member at Kellogg School of Management, and dean of the Great Lakes Institute of Management.

Not bad going for a man who was once likened to the clown in a circus (by his loudest detractor, Russi Mody). For Tata's successor -- whoever that turns out to be -- the bar's been raised sky high.

"Tata's job is the most difficult one in the country today. Whoever runs the Tata Group has to provide strategic leadership, direction and inputs on multiple businesses, which is hugely challenging," says Rajeev Gupta, managing director of private equity firm Carlyle India.

The new chairman may be relieved of the responsibility of running individual companies, but he or she will have to head a team of extraordinarily talented and able leaders.

Not only will the heir have to ensure continuation of the group's growth momentum, but also provide the direction and vision for future growth. It's not an easy task. But then, nor was Tata's.

Be tuned to the blog to know more....TOMMOROW...