Change of guard at India’s Tata Group

New chairman of India's Tata Group Cyrus MistryMumbai: The head of India’s Tata Group, Ratan Tata, warned staff of the “difficult economic environment” on Friday while handing over the reins of the business empire on his 75th birthday to successor Cyrus Pallonji Mistry.

Tata, who steered the group for 21 years as chairman, has been credited with transforming it into a streamlined conglomerate of more than 100 companies and earning a global reputation for eye-catching acquisitions of Western firms.

Tata, in a farewell message to staff, said “the difficult economic environment that we face will most likely continue through most of next year”, with constraints in consumer demand, over-capacity and more competition from imports.

“There will therefore be great pressure on our companies to reinvent themselves in terms of business processes, to dramatically reduce costs and to be more aggressive in the market place,” Tata’s internal email to staff said.

The famously media-shy Tata did not go to the office on Friday, insiders said, and was reportedly out of the city.

low-cost Nano car manufactured by Tata

A low-cost Nano car manufactured by Tata pictured during an auto Show in Jakarta on September 22, 2012
© AFP

There was no event scheduled to mark the transition, which will see Cyrus Mistry — a relative through marriage of Ratan Tata — become the new supremo.

A tight-lipped Mistry brushed his way past a gaggle of reporters as he arrived at the stone four-storey Bombay House, the Tata headquarters in South Mumbai since 1924.

Tata said he was confident that employees would extend the “same support, commitment and understanding” — that he had enjoyed — to Mistry.

From luxury cars to steel, Tata is India’s largest group with total combined sales of $100 billion in 2011-12, nearly 60 per cent of which came from business outside India, mainly the United States and Britain.

During Ratan Tata’s time at the helm, the organisation went on a global purchasing spree, acquiring major names ranging from Tetley Tea to Land Rover and the Anglo-Dutch steel firm Corus in 2007 for $13.7 billion.

In addition, Tata Motors is India’s top vehicle maker while Tata Consultancy Services is its largest software outsourcer.

Tata Sons' chairman Ratan Tata (L) and his deputy Cyrus Mistry

Tata Sons’ chairman Ratan Tata (L) and his deputy Cyrus Mistry at a function in Mumbai on April 23, 2012
© AFP

The group’s progress over the past two decades has coincided with the rapid economic development of India, which observers say Ratan Tata played a major role in.

“The Tata group has been the spearhead of India’s integration with the world economy,” said an editorial in The Hindustan Times on Friday.

“The Tatas are ahead of the pack in aligning corporate governance with international practices and this serves as a springboard for a new generation of the global Indian manager.”

Pradip Shah, chairman of IndAsia Fund Advisors, said: “Tata led the group with vision, drive, tenacity and skill.” He added that Mistry’s challenge will be “inheriting people and building teams”.

Tata Steel is the world’s seventh-largest steel producer but it is now having problems with downbeat business conditions in Europe. The group’s telecom, power, hotels and finance arms also face difficulties.

The business daily Mint described the problems facing the steel and telecoms divisions as “pockets of trouble that will need the immediate attention of Mistry.

The 44-year-old Mistry was chosen as Tata’s successor in November last year.

Ratan Tata

Ratan Tata pictured at the 82nd Geneva Motor Show on March 26, 2012
© AFP

Both men hail from India’s tight-knit Zoroastrian community of Parsis, and have a family link.

Mistry’s sister is married to Tata’s younger half-brother Noel, who was initially tipped to be the group successor.

Mistry is the son of Irish citizen Pallonji Mistry, whose construction firm Shapoorji Pallonji is the biggest shareholder of Tata Sons. Mistry successfully grew his family’s construction business turnover seven-fold, to almost $1.5 billion, since he became managing director in 1994.

Tata, a bachelor with no children, won headlines as the driving force behind the creation of the Nano, billed as the world’s cheapest “people’s” car as well as for the 2008 purchase of prestige British cars Jaguar and Land Rover.

Tata, now “chairman emeritus” with the group, plans to remain head of the charitable trusts that own two-thirds of the main holding company Tata Sons.

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