Bombay House or London House?

12 04 2008

Tatas are yet to come out with a clear explanation about the rationale for acquiring Jaguar and Land Rover ( JLR), although they owe it to their public shareholders. There are some stock quotes from them, but nothing that clearly expalain the synergy.

 
JLR is an expensive bet and its synergy with Tata Motors is at best tenuous . Tata Motors is just a vehicle for acquisition, because it happens to be in the automobiles business. It is more of “legitimacy seeking” for Mr Ratan Tata, the group chairman.
 
Because of his age, Mr. Tata is under severe time pressure. He has about four years as the Chairman of the Group. By his own admission, Mr. Tata does not want to retire on a wheelchair. At the same time, Mr. Tata wants to leave behind a legacy which compares favourably with his predecessors’, particularly Mr. Jamsetji Tata and Mr. JRD Tata.
Through big ticket acquisitions overseas, Mr. Tata has been able to achieve two things simultaneously. One, he is now known as the visionary leader who  has taken the group global. Secondly, the Tata Group  is ramping up topline growth and getting closer to regain the Number 1 position in India which it had lost to Reliance.  
 
While the jury is out on the outcome of its  highly leveraged shopping abroad, for the present, the Tata Group’s minority shareholders while lauding their Chairman’s bold moves have to reconcile to poor returns.
There could be another angle to this story. It is not inconceivable that through a series of recent acquisitions  in the UK like Tetley, Corus and now JLR , Mr Tata is saying that  the centre  of the Tata empire is now shifting to the UK. What next ? Tata group’s HQ moving from “Bombay House” to “London House”?
– G Mohan
 
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2 responses

15 04 2008
Venkat

I remember having read an article about 4 years back, which talked about LG and the TATA Group. There was an interesting mention that the in the 1960s LG was an unknown entity manufacturing combs while the Tata group was a very big name by then. However, in the next 45 odd years LG had overtaken the Tata group in terms of turnover. However, this was before the Tatas acquired Tetley, Corus and Jaguar.

In a sense, the Tata group has been an enigma, as they have never been very aggressive in terms of numbers like some of its counterparts. Tata Steel had a ‘cradle to grave’ policy for its employees, and have been pioneers in terms of landmark HR initiatives like the introduction of PF which was subsequently adopted by the other public sector companies in India.

Even with respect to TCS, a company which was formed in 1968 and did not do anything major till the early 1990’s; and as the story goes FC Kohli the CEO of TCS then, went with an option, of closing down the company, to JRD Tata. JRD had mentioned that since we have waited for 20 years, why don’t we wait for a couple of more years and see how things shape up. Sheer gut feeling! I can’t think of anything else. However, the way TCS took off after that is history.

What I am trying to hint at is that, what the Tatas did from time to time did not make great business sense always. However, the common thread was that they had money to sustain their ventures, their inefficiencies and their incompetency in certain cases and were willing to wait long term (very very long term ! which does not make business sense).

If one looks at the Corus and Jaguar acquisitions, one strong point that the Tatas had in both cases was the fact that the employees of both Corus and Jaguar preferred Tatas acquiring them instead of any of the competitors of the Tatas in those bids. The logic of the employees was that the Tatas will not retrench employees and that they are more people oriented and perceptive of the UK culture.

Now, what would the Tatas do differently to manage these companies is yet to be seen. The differentiators are not at all clear at this point of time.

Going by Ratan Tata’s words ‘car brands have an emotional quotient to it’, he is in some way echoing the sentiments of JRD Tata when he asked Homi Bhabha to conceptualise BARC, or the way he laid the foundations of TIFR. It all goes back to history when Jamshedji Tata decided to donate half of his personal wealth to form the great Indian Institute of Science in Bangalore.

At the cost of going overboard, in my personal opinion, it is good Karmas like these that have kept them going and have helped them in creating wealth for the nation, beyond the parameters of business.

Both in the case of Corus and Jaguar, at this point of time Tatas are only custodians of the companies’ wealth and are like messiahs to the employees of these acquired companies, at the cost of the shareholders. The shareholders will have to be really long on these companies to make money. Barring a few companies like TCS, ‘business philanthropy’ (if I may use the word) is strongly associated with the Tata Group; and not all their decisions can be defined through classical business terms like ROI and Payback.

22 04 2008
G.Mohan

One more indication of Tata group’s rising interest in UK is the news in today’s ET. The news is titled “Tata’s world-class R&D hub coming up in UK.”
http://economictimes.indiatimes.com/News/News_By_Industry/Auto/Tatas_world-class_RD_hub_coming_up_in_UK/articleshow/2969175.cms

The global R&D hub, will encompass R&D activities of Tata Motors, TCS, INCAT, Corus, and Tata Chemicals and now Jaguar Land Rover among others.

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