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Staid Tata group dons racier mantle

Sitaraman Shankar

The bronze bust of Jamshedji Tata looks on impassively as visitors pass the portals of Bombay House, the stately headquarters of the Indian conglomerate he founded 134 years ago.

The company has come a long way from its textile and trading roots, but even emerging in the 21st century struggled to shake off a reputation for being stolid and slow compared with the country's more nimble companies.

That is, until last month.

On February 5, the Tatas handed the relatively sprightly refining-to-telecoms group Reliance an embarrassing defeat by winning the bid for Videsh Sanchar Nigam Ltd, a state-run overseas telephone firm sold off by the government.

The purchase was the latest sign of dramatic changes at the group in the past few years, involving rebranding of its name, snazzy marketing, innovative products and its most aggressive mergers and acquisitions campaign.

"The VSNL acquisition is a clear sign the Tatas have become more aggressive, willing to pay premium prices and get things moving with the government," says Gita Piramal, author of Business Maharajas, an acclaimed book on industrial families.

"All through the seventies, eighties and nineties, the Tatas were never able to get anything done. But now at least they are not being penalised for being too honest," she says.

The group has long enjoyed a clean image avoiding some of the hard government lobbying many other companies adopted.

Charitable trusts own 66 per cent of Tata Sons, the holding company of the group.

Tata, with an $8.5 billion turnover, was dethroned as India's top private group by sales last year when the Reliance conglomerate topped with $12.36 billion after its 540,000-barrels-a-day refinery (Reliance Petroleum) went on stream.

MINDFUL OF CHANGE

The Tata group, which has 94 companies and 225,000 employees, seems bemused over the hoopla surroundings its purchase of VSNL but acknowledges it is in the middle of a period of change and most market watchers are upbeat about the new look Tata.

"They're going in the right direction," said Jaideep Goswami, head of equities at ITU Securities. "They still need to work on their speed of response to situations, but have largely got their act together over the last two years."

Last month Tata signed up racing car driver Narain Karthikeyan, 26, a member of the Formula One teams of Jaguar and Jordan, to endorse its products.

"He's ambitious and has a global vision," says R Gopalakrishnan, executive director of Tata Sons. "That fits in with what Tata wants to do -- in telecoms, software and cars -- all sexy new areas."

The suave Gopalakrishnan, 57, was recruited from Unilever's Indian operations in 1998 and is thought to be the man behind many changes in the group.

"We want to be part of the future," he says. "A multi-product group can mirror approximately the national economy. But we went into software and telecoms long before it became fashionable. Now we're taking strong initiatives in those high growth areas."

Gopalakrishnan says half of Tata's turnover will come from branded products and services by 2007, against 20 per cent in the early 1990s.

"We believe that over 15 years, we'll have completely reorganised the portfolio of products in terms of sales, profits and market capitalisation," he says.

"Further investments will largely be in the services sector," he says.

The group has dominated smokestack industries, such as India's largest private sector steel maker Tata Iron and Steel Company, its largest private sector utility Tata Power Co and India's largest truck maker, Tata Engineering and Locomotive Co.

SINGLE IDENTITY

In the last four years the group has centralised advertising, designed a common logo and made companies sign a code of conduct and pay fees for using the Tata name.

"Clearly the Tatas have moved from being a confederation of companies to a single homogenous grouping," says Piramal.

"And being a tighter ship means that there's now more emphasis on profitability," she adds.

The first indications of a new-look Tata came from TELCO through the introduction of a hatchback, India's first home-developed car called the Indica.

"The Indica proved afresh to the group that they could take on difficult projects and succeed," says Sunidhi Consultancy auto analyst Richard D'Souza. "It's given them direction and steam."

ON THE PROWL

The group has seen more mergers and acquisitions by value in the last three years than ever before, including the largest acquisition abroad by an Indian group when it bought British tea maker Tetley in 2000 to became the world's largest producer of packaged teas.

Other ventures have included in telecoms, including a tie-up with American giant AT&T which led to the creation of India's biggest telecoms company with a million subscribers and further development of Tata Consultancy Services, India's biggest software exporter.

Tata Power is bidding for Enron's $2.9-billion Indian power plant, and another anticipated big event is the possibility of an initial public offering of TCS, possibly India's biggest.

"I expect a year of further growth through acquisitions," Piramal says.

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