The world sat up and took notice of the Tata Group in the first decade of the 21st century. How? A string of prestigious acquisitions abroad and an unimaginably cheap car, transformed the 140-year-old Indian business house into a global conglomerate. However, it will be interesting to see where the group heads for in the next decade when its charismatic chairman Ratan Tata makes way for a younger person to take over the reins.

Just imagine, at the beginning of the millennium, the Tata group was staring at two disappointments — a huge loss of Rs 550 crore at its flagship company Telco (now Tata Motors ) and the financial mess at Tata Finance. However, after a decade, the group is a name to reckon with in the international corporate scene on the basis of Ratan Tata’s daring acquisitions of coveted global assets, starting with Tetley in the fall of 2000 and moving to top gear with Jaguar Land Rover in June 2008.

Tata Steel’s $13 billion Corus acquisition is the largest overseas deal by an Indian firm.The group’s revenues have jumped nine times from Rs 35,937 crore in the late 90’s to Rs 3,25,334 crore in 2008-09 , with 65% of the revenues coming from overseas.

But apart from these bigticket deals, what made the group tick was the creation of a business model that will tap the masses — a model that was inspired by the bottom of the pyramid theme. And here’s where the Nano drives in — an almost impossible feat, a people’s car with a Rs 1 lakh tag.

It was the brainchild of Ratan Tata, a Capricorn, who turned 72 a couple of days ago, became the group’s chairman in 1991. According to a a Tata veteran, the group has gone through three phases since then. One, he established control over the group, which was then tightly managed by a few people. Two, he kicked off the restructuring and restrategising programme: He set a goal to be among the top three players in the businesses the group has a presence in, to increase the group’s minuscule holding to a comfortable position ; and formation of a common brand identity in the twodimensional Tata blue logo.

Third, perhaps the most ambitious, was building a global empire. The group had some setbacks too during the decade. For example, the abandonment of the $3 billion investment in Bangladesh, pulling out the Nano project from West Bengal, the terror attacks on its hotel, Taj Mahal Palace and Tower, and the financial stress it experienced as a result of the global meltdown.

However, the next decade would see a major change in the Tata group. Ratan Tata would retire from Tata Sons in 2012, when he turns 75, to make way for a successor. However, he may continue to be the chairman of Sir Dorabji Tata Trust and Sir Ratan Trust — the two charitable trusts that hold a major stake in Tata Sons — a position his predecessor JRD Tata held till his death. He has built a global business empire. What’s next for the Tata Group?

While Tata Tele as carrier will bid for the 3G spectrum, it is the group software arm TCS that will develop diverse financial services-centric content to enrich mobile broadband
services from the Tata stable. So much so, TCS is already developing a host of prototypes by way of 3G mobile content at its innovation labs in Chennai, Bangalore and Kolkata and it proposes to charge Tata Teleservices for this on an actual-usage basis.

Confirming this, TCS vice-chairman S. Ramadorai told ET: “We are developing diverse 3G content for Tata Teleservices, which is essentially in the nature of mobile financial product applications. While Tata Tele will bid for 3G airwaves and deliver mobile broadband services, it’s TCS that will enrich the content. We propose to charge Tata Tele on ‘an actual usage basis’ and a revenue-sharing arrangement may be in place once Tata Tele is ready to roll out 3G services, pan-India.” He, however, declined to share details of the prototypes that had been evolved at the TCS labs.

Mr Ramadorai was talking exclusively to ET on the sidelines of a national leadership conference organised by Confederation of Indian Industry (CII) here on Monday.

Tata Sons director Jamshed J Irani, who was present at the event, did not go into details but seconded the emotion. “The Tata group always has the option to draw on TCS’s huge expertise for delivering 3G content for Tata Teleservices,” he told ET.

Mr Ramadorai, however, clarified that TCS would not be purely restricted to Tata Teleservices when it comes to delivering 3G content, and that it was free to offer it commercially to non-Tata telcos operating in India. “TCS’s 3G content delivery will not be restricted to Tata Teleservices alone, it will be available to all 3G service providers in India on an actual usage basis.”

Besides exploring the 3G opportunity to the hilt in partnership with Tata Teleservices, TCS is also looking at expanding software operations in the African continent. While it has a marginal presence in Morocco, it is now looking to prise open markets like Egypt by setting up sales & marketing representative offices in the initial stages.

While TCS also acknowledges that there are major opportunities for Indian IT and BPO companies in Russia, Mr Ramadorai feels: “The prevailing operational transparency levels in Russia leave a lot to be desired and we at TCS are not ready yet to go for a full-blown Russian foray. We do, however, serve Russian clients out of India or through our European operations. But our immediate focus is expanding our show in Africa, Middle East, Southeast Asia and Japan,” said the TCS vice-chairman.

“The quest is not to create the cheapest products,” chairman Ratan Tata said at the launch. “Our focus is on accessing the largest number of people. That is what drove (the efforts on) Nano, that is what drove the low cost housing project and that is what is driving this too,” he added.

The product, which has been pitched against consumer goods giant Unilever’s PureIt, will use distribution network of Tata group companies such as Rallis and the Tata Kisan Sansar, a rural-centric resource center. Tata Salt’s distribution network would also be tapped while NGOs and local help groups will also be roped in. The $71-billion Tata group, one of India’s oldest business families, has been involved with various mass utility projects and innovative products, including the supercomputer Eka.

Earlier this year, the group caught the world’s fancy when it launched what is called the cheapest ever car, for Rs 100,000, driven by the 71-year old chairman’s dream to sell affordable cars to the country’s rising middle class. The company has also ventured into low cost housing.

Based on a concept developed by the TCS Innovation Labs, TRDDC, the Swach combines low-cost ingredients, such as rice husk ash with nano technology. “Water-borne disease is the single greatest threat to global health, with diarrhea, jaundice, typhoid, cholera, polio, and gastroenteritis spread by contaminated water,” said Tata Chemicals MD R Mukundan.

Citing a 2007 United Nations report during a presentation to lauch the water purifier, Mr Mukundan said that half of the world’s hospital beds are occupied by patients suffering from water-borne diseases. In India, such diseases cause more than 1.5 times the deaths caused by AIDS and double the deaths caused by road accidents, he added.

Built around a bulb-like water purifier made of natural elements such as rice husk ash filled with nano-silver particles, Tata Swach can function without electric power or running water. The cartridge bulb has a purification medium that kills bacteria and disease causing organisms. It can purify up to 3,000 litres of water, after which the cartridge stops water flow. Fifteen patents have been filed for the technology and product.

What social revolutionary Babasaheb Ambedkar and late prime minister Vishwanath Pratap Singh could not see during their lifetime may be quitely getting underway in corporate India with the largest group, the Tatas, leading the way.

The Tatas were the first to bring many material things to India — power, star hotels and steel, to name a few. The $71-billion group with interests from tea-to-telecom is also now probably the first to introduce a hiring policy that emphasises ‘positive discrimination’ for its scores of enterprises located across the country from the seashores to deserts to mountain tops.

“What we have said is if everything is equal in merit and so on, please select somebody from the SC/ST communities. This is positive discrimination towards Dalits while hiring,” says JJ Irani, a director at Tata Sons. “We now have a Tata (recruitment) policy where our group chairman personally made the corrections in his own handwriting when we presented it to him.”

A Tata Sons spokesperson said the policy had been in place for some time, and has been most successful in newer companies which were in the process of building up their workforce.

“Tata group companies have been following a recruitment policy over the past few years where they have been encouraged to step up hiring from disadvantaged sections, particularly the Scheduled Caste and Scheduled Tribe communities, without sacrificing merit — in the spirit of positive discrimination. This policy has seen most traction in Tata companies which are in the process of building or renewing their workforce, including Trent, Tata Business Support Services, Tata Teleservices, Tata Capital, Tata Consulting Engineers, Tata Power and NDPL. In one or more of these companies, there have been significant additions at the entry levels, both at the worker and the officer levels, and some of these companies are also endeavouring to increase numbers at intermediate levels,” the spokesperson said.

Scheduled Castes and Scheduled Tribes are communities which feature in a specific schedule of the Indian Constitution. This makes them eligible for various privileges provided by the state, including reservations in education and government jobs. Scheduled Castes are also widely referred to as Dalits.

Indian corporates, which are ringing in thousands of crores of profits year-after-year, are coming to grips with their obligation to give back to a society where people are deprived of essentials such as food, schools and medical attention.

About three years ago, Prime Minister Manmohan Singh stressed the need for affirmative action, a policy which traces its origin to attempts in the US to increase representation of African-Americans in various spheres of life.

Meira Kumar, the current speaker of the Lok Sabha and the social justice minister in the first UPA government (2004-09), had suggested a number of times that reservation of jobs, as practised in the government, could be considered in the private sector too.

But industrialists of all hues, such as Wipro chairman Azim Premji and Ashok Leyland’s R Seshasayee, said mandatory reservations, without considering merit, would cripple the corporate sector that was just emerging from the clutches of the Licence Raj. Hence, the lobby group, Confederation of Indian Industry (CII), constituted a panel under Irani on Affirmative Action.

“Companies are being encouraged to provide for more executive positions from the SC/ST groups,” according to CII senior director Indrani Kar. “Industry is stepping in to create capabilities through scholarships, coaching programmes and funding entrepreneurs.”

Social discrimination has been a vexing issue. A huge section of society was once termed ‘untouchables’ — whom the father of the nation, Mahatma Gandhi, called “Harijans”, people of god, in an attempt to erase the taboo. Many reformers such as Ambedkar from Maharashtra and EV Ramasamy Naicker, also known as Periyar, from Tamil Nadu, have fought for the rights of these deprived sections of society.

COMPANIES DOING THEIR BIT

The onset of liberalisation after 1991 has meant that most of hiring is now taking place in the private sector, leading to demands from politicians and social activists for affirmative action and even reservation.

“We are making conscious efforts to widen the canvas of people we employ and make certain we are not leaving specific groups of people out,” says Surinder Kapoor MD of Sona Steering, an auto parts maker. “We are not just looking at it from an employability point of view, but from a grassroot level in terms of training and education.”

Some of the experiments in hiring people from specific castes have also proven successful.

“Noel Tata, the MD of Trent, is convinced that once candidates from Dalit and tribal communities are trained, their performance is far better than others…they show more commitment and don’t migrate easily. Over 50% of the hiring in Trent is from the SC/ST communities,” says Dr Irani.

“I had told the PM that we have to build a reservoir of talent, instead of just getting people employed,” says Irani. “Our job is to (increase the talent base) through employability, education and training.”

Some companies have discreetly begun caste profiling of employees through voluntary disclosures, after the union ministry of minority affairs crafted a ‘diversity index’, which measure the diversity of workforces.

Companies such as those in the Godrej Group, Thermax, Crompton Greaves, Sona Steering, HSBC, Mahindra & Mahindra, Crompton Greaves, Cummins India, Godrej and Boyce, Bharti Airtel among several others are actively pursuing the policy of affirmative action to create better job opportunities for Dalits, tribals and OBCs. OBCs, or other backward classes, refer to another set of communities, different from the SC/STs, who also benefit from reservations in government jobs and state-owned educational institutions.

“Godrej Industries and associated companies are committed to inclusive policies that strive to provide equal opportunities for socially or otherwise disadvantaged but meritorious individuals. Companies are encouraged to create an enabling environment for such individuals.” Visty Banaji, executive director and president, (Group Corporate Affairs), Godrej Industries, said. The Godrej companies have a scorecard that includes inclusive hiring as a parameter of performance.

INCLUSIVE HIRING

Salman Khurshid, the minister in charge of corporate affairs, who is also in charge of minority welfare says that companies must widen their efforts to encompass all sections of Indian society. “CII has been regularly updating on inclusive hiring details. But so far, the only concrete outcome has been in the SC/ST area. Corporates need to widen the scope of inclusion. Our ministry is looking at a proposal of financing the training cost for those from underprivileged groups who might be given employment,” he added.

Inclusive hiring referred to by Mr Khurshid, would mean more recruitment not only of Dalits and tribals, but also from the OBC and Muslim communities, who many say are also underrepresented in corporate India, particularly in the top echelons.

The government is also actively looking at bringing an equal opportunity legislation “It is awaiting clearance by the law ministry before Cabinet approval,” Mr Khurshid told Neytri.

Business houses such as M&M and Godrej are also funding entrepreneurs from deprived communities and are offering training facilities through ITIs to workers to create employability.

“We are looking at ways of helping employability of individuals from such groups and also educating children through the Mahindra Pride School in Pune where after finishing school, the children are ensured jobs at retail outlets such as Cafe Coffee Day, BPOs and KPOs,” said Rajeev Dube of M&M group.

Industry officials hasten to add that they are not sacrificing merit. “For us, capabilities are important and we do not compromise on that,” said Krish Shankar, HR head at Bharti Airtel. “In that sense, if the candidate is meritorious, we hire them irrespective of his or her background in terms of caste. We are trying to make a difference, but not at the cost of capability.”

A LONG WAY TO GO

Some say that these efforts merely scratch the surface. “Ninety-nine percent of the corporate sector is still controlled by very small strata of the very rich and influential, and they continue to promote talent from a small group,” says Surinder S Jodhka, professor of sociology at Jawaharlal Nehru University and director of the Indian Institute of Dalit Studies. “The rest still do not have access to either capital or the opportunity to be a part of the growth happening.”

Social problems in vast swathes of the country such as Maoist violence, kidnapping of corporate executives and agitations against land acquisition are partly blamed on the centuries-old injustices.

“If the corporate sector does not become inclusive, it will face resistance which will in the long run lead to civil wars,” says social activist Dr Kancha Illaiah, professor of the department of political science, Osmania University, Hyderabad.

Industry is willing to do its bit to the society voluntarily, rather than being pushed to do so through legislation. But many consider industry actions may be too little to have any significant impact. Some even say that the industry’s attempts in affirmative action may be a public relations exercise.

“The initiatives taken by them are just a showcase programme and part of some corporate social responsibility (CSR) moves,” says professor Jodhka. “That is not talent development. The issue will soon become a political issue. If some of the top industrial houses invest in good colleges in the tribal areas, most certainly there will be good candidates coming out of such places.”

The government and society, may have to rely on what corporates voluntarily do, as any legislation may be challenged.

“A legislation can be challenged by the corporate sector, which has an obvious right to hire according to its requirements and policies,” says Zia Mody, senior partner at law firm AZB & Partners. “There are going to be very strong pulls and tugs, which may force the government to look at some half-way discriminatory policy. What is the rationale and the percentage of hiring is something that won’t be easy and very difficult to sustain.”

The plan to develop the over 20-acre land at Borivali, a western suburb in Mumbai, is part of an earlier proposal to use under-utilised land that various group companies own across India, said two people familiar with the development.

The salt-to-telecom group is understood to be looking at two options — the proposed marketing hub linked to its manufacturing activities and retail — for the Borivali land, which once housed Tata Steel’s wire-making division. Most of the operations at the wire division have been shifted to a location at Boisar near Tarapur and work on developing the land would be initiated once the entire transfer is complete.

A Tata Steel spokesperson confirmed that the company has initiated work on shifting its manufacturing operations from Borivali. “We have started shifting part of our operations to Boisar and part to Jamshedpur under a restructuring programme for the wire division. We haven’t yet taken a decision on what to do with the land there. At the moment, non-manufacturing departments such as finance and purchases of the wire division will continue to be housed there in Borivali.”

Under the proposal, Tata Steel, which owns the land, could consolidate various sales and marketing offices that are currently spread across 15 different locations in Mumbai under a single roof, said one of the people who is involved with the project. The move would be to increase marketing synergy, he added.

As the size of the land is large, the Tata group is also planning to rope in its retail unit, Trent, to build
commercial properties for its popular chains — Westside, Croma, Landmark and Star Bazaar. As the land is at a prime location — next to the Western Express Highway — Trent would benefit from such an exercise, said people connected with planning.

Since 2006, the Tata Group has been working on developing surplus land belonging to various group companies such as Tata Chemicals, Tata Steel, Tata Power, Tata Motors and others. An earlier study had said the group had identified parcels of land amounting to 800-1,000 acres across the country.

In February, Neytri had reported that Tata Housing will build on its tie-ups with banks and financial institutions by developing properties on land owned by the group. The group had also been considering options of using the surplus land for raising money by leasing it out.

“The Indian conglomerate Tata has snubbed Lord Mandelson, the business secretary, rejecting a 10 million pound loan for a technical centre in the Midlands,” the Sunday Times reported.

Quoting senior motor industry sources, the report said the Tatas, owner of premium car brands Jaguar and Land Rover
and steel maker Corus, has in the past few days told the government that it does not want the money.

“It has decided it can get better terms from commercial lenders,” the newspaper said citing sources.

Mandelson had last month announced the loan (10 million pound), saying that Britain was backing Tata’s research into electric cars.

The money was awarded as part of the Automotive Assistance Programme (AAP), a scheme that was designed to help the car industry overcome the worst of the recession and foster investment in new technology.

The 10 million pound government loan was designed to bolster a 25 million pound investment by Tata Motors, in its European Technical Centre based at Warwick University

The Warwick technical centre was set up in 2005 to develop technology to be used in Tata cars manufactured in India and give the group access to European automotive talent.

It is working on a European version of the Nano, the affordable so-called “people’s car”, which was introduced in India last year.

The money was supposed to be used to develop an electric version of one of its existing models.

The daily further said that the Tatas had declined to comment, while Mandelson’s Department for Business, Innovation and Skills said that the loan was still on offer.

Earlier, the Tatas and Mandelson were involved in negotiations over aid for Jaguar and Land Rover.

The Tatas, which bought the British brands from Ford last year for 1.3 billion pound, had asked the government for a 500 million pound loan guarantee when vehicle sales slumped. But Tatas eventually decided not to accept a government offer, saying it could find better terms elsewhere.

The newspaper further said that Jaguar Land Rover is considering whether to close one of its three UK plants as part of a plan to cut costs.

By the month-end, Ginger will open its 21st property at Wakad in Pune. This comes three months after the Tata group-owned low-cost hotel chain opened its 20th property in the steel city of Jamshedpur.

The target: nine more hotels by the end of next year, which means the no-frills Ginger has set up an average five hotels a year since its inception in 2004.

That’s not a great speed, but Prabhat Pani, Roots Corporation CEO, is going all out to shift gear. Ginger is run by Roots, a subsidiary of Indian Hotels, which also owns the Taj Group.

Pani is now looking beyond the traditional build, own and operate format and is in talks with land owners, property developers, mall owners and real estate companies to spread his hotel chain far and wide.

“The last few months have been the most challenging from a real estate point of view. We realised that there is no point in sticking to the original model of buying land and then building a hotel if we have to expand fast. Flexibility is the key,” says Pani.

Ginger is now going in for either leasing of land, or space in a large building. It is also pursuing the franchisee model based on revenue sharing. All this means costs go down substantially. The company currently has only one managed property in Durg but now wants to have more such contracts moving forward.

Ginger has also tweaked its earlier tariff strategy. The single rooms now cost Rs 1,000-1,500 instead of the earlier uniform tariff of Rs 999 – whether you are in Delhi or Bhubaneswar.

The other new innovations include introduction of smart rates – if you book early, you pay less than the standard rates; and rooms with a theme– treat yourself to original works of art by guest artists at no extra cost.

Scaling up its presence across the country is just one part of Ginger’s growth strategy. The hotel chain has set up a small team of managers who would look after the requirements of prized customers — either frequent guests or high profile executives. The company has so far built detailed dossier on 500 such clients.

This is effective as 60 per cent of Ginger’s clients belong to the corporate sector. And 40 per cent of them are repeat customers, who visit Ginger twice in three months.

“Our account managers constantly stay in touch with our regular customers informing them about the latest changes we have made or the opening of a new property or the offers currently run at some of our hotels.”, Pani said.

The percentage of repeat leisure travellers is also high at 40 per cent, Pani says.

Besides, Ginger is now looking to strengthen its online presence by revamping its website to make it more informative, providing extensive data while being interactive. This is one of the mediums where the company is making investments to gain an upper hand in the budget hotel segment.

“We are investing, we are going to specialists who understand the role of the internet in travel business. We will very soon have a newer version of the online booking format. This would make the packages more powerful and attractive. We will also carry tickers which will carry the best rate available within the city. With the number of hotels going up, the service will come in handy,” Pani says.

The new medium, which will be launched shortly, will provide live rates of all Ginger properties across the country with best available packages along with the entire details of the cost structure and facilities provided. It will also give comparable rates of other hotels in the vicinity of a Ginger property.

Pani says the recent efforts have worked, with the average room occupancy around 65-70 per cent across its 20 properties. That greatly helps in generating money and achieving the break even point faster than earlier”, Pani says.

While other hotel companies such as while Red Fox and Lemon Tree are busy projecting themselves as a class above the purely budget brand, Ginger has decided to stick to its original business model — ‘smart business hotels’ without frills and fuss, yet offering most of the amenities on offer at higher grade hotels, the idea of which came during a meeting with management guru C K Prahalad.

To make sure that the concept makes business sense too, Ginger decided the following: in regular business hotels, the room to manpower ratio is 1:3, but for Ginger, it was decided to restrict it to 1:0.36. This was made possible through outsourcing of management facilities, food and beverages and the reception facilities.

Pani says Ginger doesn’t want fancy restaurants, swimming pools and other such luxuries as customers don’t need them in a no-frills hotel.

Two decades back, many in Bombay House, the Tata Group headquarters, thought that Russi Mody, Darbari Seth, Ajit Kerkar and Sumant Moolgaokar would be there forever. Those who replaced them thought it would be difficult to change the way the group functioned. Both were wrong.

The fiefdom of the old guard which thrived under the legendary JRD Tata’s more than half-a-century stewardship of the group came to an end, acrimoniously in some cases and smoothly in some, after Ratan Tata took charge in 1991. Not only did Ratan Tata throw the old guard out, but also brought in young blood.

“It probably was looked upon as a group where a lot of elderly people worked and one which was hierarchical,” says R Gopalakrishnan, executive director, Tata Sons and a former vice chairman at the then Hindustan Lever. It was against this background that Ratan Tata stated in the mid-1990s that there was a need to have young CEOs. “It has taken some time to get the process right and for this policy to have an impact.”

What would have been once a laughing matter in the Tatas, is now a reality. Young men are becoming CEOs.
Men in the Tata Group rarely retired. So, the younger Tata’s first target was to ease out men from the socialist era and bring in an age limit where it was compulsory to retire. That saw the exit of men such as Russi Mody, the popular chairman of Tata Iron & Steel Co, now Tata Steel, Darbari Seth, the powerful head of Tata Chemicals, Ajit Kerkar who built the Taj Hotels brand as the head of Indian Hotels.
Now, meet Brotin Banerjee. He is 35 years old and heads Tata Housing Development which is pioneering low-cost homes, a near impossible event two decades back. After joining the Tata Administrative Service (TAS) in 1998, he had stints at Tata Chemicals and Barista Coffee.

The move to Tata Housing was in 2006, when he came aboard as deputy CEO. Last year, Mr Banerjee was anointed MD & CEO of the company.

“If you had told me, when I joined the TAS in 1998, that I would be heading a Tata Group company in a decade, I would have laughed it off,” he says.

Mr Tata’s vision

This transformation is the vision of Ratan Tata, who faced many an obstacle in his early days as the head of this tea-to-telecoms conglomerate. He brought in the concept of group head for human resources in 1998. “While a group like the Tatas does have a board which takes strategic decisions on these businesses, they may not necessarily have the skill set to run them on a day-to-day basis,” says Sunil Alagh, management consultant and chairman, SKA Advisors and former managing director at Britannia Industries. “This is where the need to have young CEOs comes in, since these individuals are invariably specialists with a good understanding of such businesses.”