After steering the Rs 3.25-lakh crore ($70.8-billion) Tata group for the past 18 years, India?s iconic industry chieftain, Ratan Tata, is now looking for a successor?and the candidate could be from outside the family, even from overseas.
In an interview to the Wall Street Journal, the 71-year-old Tata said the group is in the process of formalising a successor to lead a diverse industrial conglomerate that includes Tata Motors, Tata Steel, Tata Consultancy Services and Tata Power among its 27 listed companies.
?We have some outside consultants and a formal search process is on. There are no constraints. We are looking both within the organisation and outside. The successor, I would hope, would have integrity and our value systems in the forefront and hopefully would carry on the path that we have tried to set for the company?s growth,? Tata was quoted as saying.
When contacted by FE, the Tata management, however, declined to comment any further than what was stated in the interview.
?(The succession plan) gives investors a lot of clarity. It reiterates their faith that the company is not driven by a single personality, as is with some groups in India, but is thoroughly professional and that they can depend on it,? said a research head with an overseas fund.
One possible reason for extending the search beyond local talent is the fact that 65% of the Tata group?s revenues come from overseas. ?We are a company that has global reach and global presence,? Tata said in the interview. He, nevertheless, added that it would be certainly easier if the candidate were an Indian national.
All but one of the group?s past chairmen have been Tatas, although at the moment no family candidate has been publicly identified to take over as chairman. Market watchers say the broad nature of the group?s search is testament to the high standards of corporate governance that the group has set. ?This is a very professional move and we do not see any adverse impact of this on the market,? said Motilal Oswal, chairman of leading Mumbai-based brokerage firm Motilal Oswal Financial Services.
Three of Tata group companies were among the top ten gainers on the BSE Sensex on Wednesday, with Tata Steel and Tata Motors topping the list.
Tata said the conglomerate model would continue to work reasonably well in India despite falling apart in other parts of the world, adding that when the group had tried to shed some businesses it ran into strong objections from employees and the public. The group has a total of 98 operating companies.
Under his chairmanship, Tata has led a drive to expand the reach of the group internationally, making headlines worldwide with the $12-billion acquisition of Corus by Tata Steel and the $2.3 billion Jaguar-Land Rover deal of Tata Motors. ?Tata has truly gone global. Its Corus and JLR acquisitions are strong representations of how the Tata group is truly a global Indian MNC,? said Mobius Strip Capital Advisors principal Indranil Deb.
Tata said the group was still digesting those acquisitions, which had been made harder due to the global financial crisis and economic downturn. In their wake, he asked group companies to undertake a major cost-cutting drive. And despite the hiccups, Tata believes the two pricey buys were strategically sound and worthwhile end of the day.
?Tata Motors was able to extinguish its borrowing of $3 billion through this difficult period, and most people don?t realise the magnitude of that task,? he said.