BATON PASSES FROM TATA TO MISTRY - A NEW PHASE BEGINS
By Ruma Dubey
Just as we had heard our grandfathers tell us about JRD Tata and how he spoke at the AGMs, we might tell our grandchildren that we too lived and flourished at a time when Ratan Tata took charge and ruled. Running a conglomerate which makes everything, right from salt to steel, he is undoubtedly the ‘maharatna’ of India Inc.
Ratan Tata turns 75 years old today and as per the rule book, which he himself had very famously formulated, he too retires. And his 21 years tumultuous tenure will be remembered whenever we talk proudly about India Inc. Thanks to him, Jaguar, Land Rover are now ‘Indian’ and so is ‘Corrus’. He showed the guts to make mega buys abroad when others were merely watching and he also kept his word and got the Nano, India’s cheapest car onto the bumpy roads of India. More importantly, he kept the integrity and trust of the ‘Tata’ tag intact and even today, when every other value system in India seems to have crumbled, Tata remains a name of respect. Notwithstanding the infamous Radia tapes, Ratan Tata remained a beacon of honesty in an era of crony capitalism and that is no small feat.
As he begins a new life starting tomorrow, we wonder how things will be under the new chosen one – Cyrus Mistry. When JRD died and Ratan Tata was made in charge, Tata stocks crashed as no one had faith in the new man. But this time around, the transition from Ratan Tata to Cyrus has been made public, has been slow and the market has also had time to accept him as the new ‘Tata’ man.
Just as Ratan Tata changed a lot of equations for India Inc, his new life ahead is not laid back or lazy. It will be more philanthropic. He will be taking on a more active role at the flagship Tata charitable trust - Sir Dorabji Tata Trust. He will shift office from Bombay House to Elphinstone Building, the same building where the swanky new Starbucks opened its first coffee shop in India. Tata wants to focus full time on philanthropy and wants to bring about a sense of innovation and best management practices to social upliftment. But having said this, one should remember that Ratan Tata will chair the trusts which hold 68% of Tata Sons, which in turn owns most of the Tata empire. So even if Mistry will personally, through his own 18% of Tata Sons have a say, Ratan Tata through the trusts, will continue to have a much bigger ownership. And that in turn means, he will be having the ultimate decision making power in matters of crux. But most likely, apart from cars, which is Tata’s passion, Mistry is likely to have a free run.
Many have accused Tata of running a white elephant and not firing employees or selling off units to reduce debts or increase profits. But that simply is not the Tata culture. This is probably one of the rarest of conglomerates in the world, where profit is one of the motto’s but its guiding principle is nation building and employment generation. That explains why Tata neither fired employees at JLR nor shift the unit from UK to cut costs; he kept all 33,000 employees job intact and today, the company has turned around, doing better than Tata Motors.
Mistry has a tough job- running something as gargantuan as a Tata empire while keeping the 144 year old values intact. It is unlikely that in the initial year or two, he will make any major independent decision; he will continue to remain under the tutelage of Ratan Tata. He is unlikely to ruffle feathers immediately. A few veterans might not concede to his authority but most of the old stalwarts will finish their tenure in 2-3 years. The telecom and hospitality ventures are currently the biggest laggards in the group, yet Mistry is likely to toe the line of keeping the value of Tata in place.
Mistry’s family owns 18% of Tata Sons and he is today, a bigger shareholder than Ratan Tata. It is said that it was at the behest of his family that TCS got listed and they were the ones who got Tata Sons to declare higher dividends. When you are just an investor the way you look at a company is different but when you are made responsible for the company and its employees, surely the entire approach changes from mere capital appreciation to a more holistic benefit.
Mistry will not fill Ratan Tata’s shoes but he needs to make his own footsteps, as deep and and maybe longer than Tata.
