Richard Branson came to India, rode an elephant to his press conference and wore an achkan like Air-India's Maharaja mascot. The media, starved of colourful personalities and quotable quotes, made him headline news and he didn't let them down either. The colourful tie-up with Air-India was followed up with an equally dramatic exit as Branson accused British Airways of running scared and cancelling his confirmed ticket to London. Less than a week later international agencies reported that Branson had sold 49 per cent of his company to Singapore Airlines -- and everybody was so overwhelmed by the Branson Effect that there wasn't a squeak of political opposition or debate even through Parliament was in session.
For Ratan Tata the irony must have been incredible. It was the same Singapore Airlines with which he tried so hard to create a 50:50 joint venture to start a domestic airline. For several years, a series of aviation ministers cutting across three governments and different political parties had brazenly blocked the project and hounded it until Tata simply gave up in disgust. That nobody questioned the Virgin deal further strengthens the view that powerful corporate rivalry and the threat of serious competition killed the Tata Airline.
Ratan Tata has all our sympathy, but his saga of lost projects and blotched opportunities is starting to tell a rather dismal tale about the group's future. The Tatas are still the most respected industry group in the country. But increasingly their inability to get the big projects or the sort of entrepreneurial professionals that J R D Tata managed to gather around him is worrying investors and well-wishers.
In the last few years the Tatas have dropped two major aviation projects -- the airport at Banglore and the Tata Airline. Politicial partisanship was certainly an important factor, but they were lost business opportunities. One does appreciate the fact that the Tatas are not a corrupt organisation and wouldn't like them to be different. But the alternative is to fight for their projects and to fight corruption. Unfortunately the group tends to be prickly towards the press and intolerant of the slightest criticism. The result was that even those who supported the airline project found it difficult to get adequate details to place before the public -- until the time when Ratan Tata simply pulled out.
It is no different in the electricity business. When the government was negotiating the hugely expensive Dabhol project of Enron Corporation, the Tatas were neither in competition nor shared information. Today, the far less expensive Tata Electric Companies power is nowhere in the picture while the state buys more expensive power from Dabhol and everybody is the loser. The irony is that even the Bombay Suburban Electric Supply Ltd has managed to eat into TEC's licensed supply area and bagged the hastily-cleared Sapkale project on the eve of the election.
The sale of the 7.2 per cent stake Tata stake in the cement giant ACC is another dimension to the existing confusion. The Tata decision to sell half its stake is not as much of a surprise as the decision to hang on to the remaining half. Its changing stand about ACC perplexes investors.
In 1995 the Tatas with 11 per cent in ACC allowed it to be called a professionally-run company. It then issued rights shares at a whopping Rs 3.900 premium -- ACC's face value was then Rs 100 per share -- which devolved largely on financial institutions. In 1998 they had increased their holding by two per cent, called it a Tata company and attempted to give themselves preferential shares at a discount to the market price so as to raise the Tata holding to 17.8 per cent. The financial institutions refused to play ball and the Tatas went into a self-righteous sulk.
Now news reports claim it was the FIs's refusal to permit the preferential issue which dictated the decision to sell 7.2 per cent of its holding. That is all very well, but the FI stand has in fact been vindicated because the Tatas who wanted shares at Rs 110 through the preferential issue have now collected Rs 390 per share from Gujarat Ambuja Cement for the shares.
In 1995-96 Ratan Tata was working hard to raise Tata Sons's holding in the group companies through controversial moves such as preferential allottments, collecting royalty payment from companies which used the Tata name, and asking them to subscribe to expensive rights issues of Tata Sons.
Ironically, when the group is now able to raise serious money by simply spinning off Tata Consultancy Services into a separate company and selling less than 25 per cent of the equity, the management says it has no such plans. TCS has played a pioneering role in the Indian sofware industry. Yet in the public eye it has fallen behind Infosys and Wipro which have created huge wealth for employees and investors, and have also remained ethical and modest. The absurd valuations in the information technology business will not last forever. The Tatas seem to have missed another important pportunity.
And finally the people. In 1939 when J R D Tata took over as chairman of Tata Sons, he went out of his way to woo the most towering and individualistic of personalities to be his directors and also encouraged entrepreneurship from within. His team included John Matthai, A D Shroff, Sir Homi Mody, Sir Ardeshir Dalal, Booky Kooka, Sumant Moolgaokar, Russi Mody, Ajit Kerkar, Nani Palkhivala and Darbari Seth. My research for a biography of A D Shroff, reveals that strong personalities also meant frequent clashes, but J R D managed them all and made the business empire stronger, more dynamic and extremely lively.
Ratan Tata has spent most of his time gaining control over the group by getting rid of the formidable satraps who helped create and build the business empire. The manner in which some of his most dynamic people were forced out has done nothing to enhance the image of what J R D Tata called The Firm. What is worse is that they have not been replaced by equally dynamic and bold professionals.
The following letter written by J R D to hold his fiery financial wizard A D Shroff after a bad disagreement led to Shroff dashing off a curt resignation. It shows how the group was different under J R D and why he commanded such undying loyalty from everybody who worked with him. He wrote: