When Ratan Tata, an avid pilot, is asked to pose for a picture in his meeting room in front of several shelves of model aircraft, he makes a wry joke. “Now he’s going to make some reference in the article to all my toys,” the Tata group chairman says.
The 70-year-old head of India’s largest private-sector group appears to be in a good mood.
He has just agreed to pay £6.7bn ($13.1bn) for one of the best toys the boss of a conglomerate specialising in heavy industry could ask for – a new steel company.
In the process of buying Corus, the Anglo-Dutch producer, he has made corporate history with the biggest Indian takeover of a foreign company. And he has earned the applause of an India bent on assuming a place in the world commensurate with its population size and the potential of its economy.
But he has also created a lot of work for himself and the Tata group management team.
Not only will it have to integrate a foreign company almost the same size in terms of sales as the entire group, it will also have to rebalance its portfolio of industries that is more heavily exposed than before to the fickle global steel cycle.
By any measure, the Corus takeover, clinched in an overnight auction on Wednesday against Companhia Siderúrgica Nacional, represents a career peak for a man who took the helm of the group 16 years ago.
Founded by Mr Tata’s ancestor, Jamsetji Tata, in the mid-19th century, the group employs a quarter of a million people across sectors that include automotive, technology, chemicals, engineering, telecoms, energy and consumer products.
Educated in architecture at Cornell University and management at Harvard, the younger Mr Tata, on taking office, set about reforming a group that had been
struggling in the face of growing international competition as India gradually opened its economy.
As the country’s fortunes improved, so did those of the Tata group. Today, three businesses account for about 60 per cent of its $21.9bn in sales and 83 per cent of its profits: Tata Steel, Tata Consultancy Services, the listed information technology outsourcing unit, and Tata Motors, which makes trucks and cars.
The group has operations in 54 countries and its companies export products and services to 120 nations.
The benefit of going global, Mr Tata says, is that it diversifies the risk of operating in one geography, opens new markets, and enables a company to build scale across its full product range.
He says the group’s next major push is likely to be in automotives, through the launch of products as part of a joint venture with Italy’s Fiat and an increase in production in the rapidly growing domestic market.
“We have very preliminary but conceptualised plans with Fiat to share platforms, to have joint product development to enter markets in Latin America,” Mr Tata says.
“We also this year and next year will have five or six new product launches and all of those will constitute a dramatic change in volume in our product.”
He says the company’s automotives expansion may include acquisitions, though the group is not planning anything specific.
Analysts speculate that the group’s next move might be to buy an automotive brand name in the US or Europe, using the group’s large holdings in Tata Consultancy Services as a source of equity.
Mr Tata says the Corus deal may “embolden” other Indian companies to be more adventurous than they have been. But he warned Indian companies against behaving opportunistically overseas.
“Do you buy something because it has interesting assets and then strip the assets of the company [and ship them back to India]? This is not something we would want to do and we would hope that, if there was an Indian company and it was contemplating that, that they wouldn’t do it either. It takes many years to undo that kind of damage in terms of perception,” Mr Tata says.
He says India needs to create more jobs in the agricultural sector to cater for the millions being added to the workforce. Relying on the services and manufacturing sectors to provide these people with jobs will not be enough.
“We have to understand the magnitude of the problem. We have a billion people, we have 17m to 18m added each year, we have perhaps 40 per cent of our population under the age of 20,” he says.
“Therefore, we have the responsibility of educating, feeding and finally finding jobs for the new entrants on the market.”
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