Ratan Tata and His Dream Machine

Ratan Tata, a shock of grey on his head, a grim look on his face, shuns the limelight. But on Thursday, the industry patriarch perhaps did not mind the thousands of flashbulbs that popped in his face as the world took its first look at an astonishing Tata product: the Nano. His usual taciturn expression gave way to a smile as he threw a repartee at the environmentalists for their worries that the Rs 1 lakh "people's car" would add to India's emission woes.

Ratan Tata's quiet moment of triumph was deserved. Despite being born to luxury, he had felt for the Indian family, riding four to a bike. Their dream machine-his dream machine-was here now, having weathered the odds and the critics' pessimism. To top it, there came news that the Government had allocated spectrum to his companies to operate GSM mobile services, a moment that harkened back to bitter wrangling with established GSM players.

The initial response to the Nano has been overwhelming and the tiny, Noddy-land car is expected to help the company cross several milestones. With revenues at Rs 1,29,994 crore for the financial year 2006-7, and group companies enjoying a market capitalisation of Rs 2,51,487 crore as on January 10, 2008, the Tata Group is on a strong footing, contributing more than 3 per cent to India's GDP. Nano, being the world's cheapest car, has made international players sit up in amazement and the company has received proposals from some African, Latin American and Southeast Asian countries to manufacture the car there.

The Nano will make millions of Indians mobile. But then, that has always been a Tata speciality: over the 138 years of the company's existence, it has been helping India propel itself forward. It is emblematic of the company's own recent push to become a proactive corporate mover, not the stolid doer it had been for generations. The acquisition of Tetley in 2000, the takeover of Corus to become the fifth largest steel company in the world and upping its stakes to become the frontrunner in acquiring the Jaguar and Land Rover brands from Ford, all make a statement for Tata as a company on the move.

When Tata Tea bought Tetley, it made big news as Tetley was a much bigger company. Similarly when Tata Steel took over Corus, it did so without a hint of corporate bashfulness. When Tata Tea bought 30 per cent stake in Glaceau, it was looking for the international marketing acumen of the company to leverage for Tata Tea. But then with another company acquiring the majority stake in Glaceau, Tata was left with no option than to book the gains of its investment in Glaceau. But there was still a footnote to the episode and it stated that the Tata Group was aggressive about going global.

The importance that the economic community puts on the Tatas is evident from the fact that three group companies form a part of the Sensex, the most to represent a corporate. RDAG (Reliance Dhirubhai Ambani Group) is represented by two companies in the benchmark stock market index. The combined weightage of the market cap of the three companies in the Sensex is 6.4 per cent. Tata has 13 other listed companies, excluding the three, that are a part of the Sensex.

The future of the group will be defined by some of its flagship listed companies-TCS, Tata Steel, Tata Motors, Tata Power, Tata Teleservices and by Tata's venture into financial services with Tata Capital. In the current market scenario, not only does Tata Motors stand tall after the Nano, but Tata Steel, on the back of growing demand for steel and rising metal prices, is also strongly positioned.

Power is the buzzword in Tata circles these days. Tata Motors has bagged the Mundra Ultra Mega Power Project and there are other projects to be undertaken by the company. As for its finance company, the entity Tata Capital has three companies within it, Tata AMC, Tata AIG Insurance and Tata Investment Corporation. As and when Tata Capital gets listed, it will unlock a lot of value for the company.

How the company moves ahead will depend a lot on who takes over from Ratan Tata, a bachelor. Retirement, though, is not what is preoccupying Ratan Tata's mind. In fact, he has another dream-for himself and his countrymen: availability of clean drinking water. He has already put his scientists on the job of finding the cheapest method of purifying water for drinking.

The company has had a strong inheritance line and that has been an important aspect in the continuous evolution and growth of the company. Ever since Jamsetji Tata established the first textile unit in 1870, the company has rigorously moved ahead. Dorab Tata established Tata Steel and Tata Power and took the Tatas into new segments of operation. Then came the aviation pioneer JRD Tata, who brought commercial aviation to India under the name Tata Airlines, later nationalised into what became Air-India. He also has to his credit the tea business, hotels, trucks and locomotives, among others.

The latest in the line of Tata patriarchs, Ratan Tata has not proved less than his predecessors. He was instrumental in producing India's first indigenously designed and manufactured car, the Tata Indica, a new version of which was released a day before sibling Nano took centrestage. He has shown the aggressive face of the Tatas-as the acquisitions that it has gone for and successfully completed. And now he has delivered on his promise of launching the world's cheapest car. While Ratan Tata is around, surely there will be little talk of a successor.

SUMANT BANERJI

The people's car, also the cheapest in the world, is here with us and as we write this, it is being scrutinised by millions across the world. But not many know that the Nano is not only a work of art perfected by 50 engineers in Tata Motor's plant in Pune-the character of this low-cost, cute-looking, four-wheeled vehicle has the stamp of Ratan Tata all over it.

It was Tata, a trained architect himself, who wanted a car tall enough to hold his 6 ft tall frame. People say he once joked in the factory that he wanted to drive the car himself at the launch. That is how the car gets its tall boy looks.

When the company was looking to cut costs, it was Tata who suggested the Nano have one windscreen wiper instead of two. The original blueprint for the design of the car, prepared by Italy's Institute of Development in Automotive Design-which had also designed the Indica over a decade earlier-had a more sedate-looking car. Tata, with his eye for detail and aesthetic sense, made it look more revolutionary and, few will deny, more likeable. Along the way, it became less expensive as well.

But the Nano is not a story of one product. It is not a story of Ratan Tata's long pending dream. It is a story of the journey of Tata Motors itself. As the Tata patriarch himself admitted after the unveiling, it was the Indica that was a bigger risk. For a successful company, Nano is a means of achieving an ambition, not of survival.

In many ways, the Nano story starts in 2000. That was the year when the company, despite its Indica, faced losses for the first time in its 55-year history. An economy that was in decline resulted in the company's turnover receding by almost 9 per cent in 2000-1.

Till then Tata Motors was the face of the Indian highways. Its sturdy trucks and buses were as ubiquitous on the dusty landscape as the roadside dhabas. The company was the unchallenged leader in the auto industry with an over 65 per cent market share.

Things changed after 1992, when globalisation stepped in and Tata found itself wanting. A spate of technological joint ventures followed, first with Cummins Engine Co and then with UK's Tata Holset Ltd and Tata entered the passenger car space with the Indica in 1998. The idea then was to entrench itself in a widely changing industry but the crisis at the turn of the century proved that Tata was in trouble. In 2000, Tata Motors was a bulging, slow-moving auto giant all set for decay.

The company went back to the drawing board and the commercial vehicle division was the one that saw the first change. The head of the division, Ravi Kant (the current MD), decided to revolutionise the flow and inject young blood. Instead of depending on the grey heads, he asked the engineers to show the way. The solution he had in mind was to cut costs.

It was in those times of distress that a saviour in the form of Girish Wagh emerged. Wagh was given the responsibility of a project so risky that at that time only a young man could have taken it. It was to build a small truck that would ensure last mile connectivity. Something that would work where the traditional trucks stopped. Today we know it as the Tata Ace - a mini truck that was such a runaway success that even passenger cars paled in comparison.

Ace's success convinced Tata that a small car, built frugally but practically, would sell. "Nano was a concept that was in Tata's mind even as Ace was being developed. In many ways it is a precursor to Nano and its success convinced him of its saleability-an important facet for a listed entity with shareholders riding on it," said a Bosch official, the company that supplies Nano engines.

Wagh was the obvious and automatic choice for Nano as well. By the time Tata announced his wish to make a small car in 2003, the company was back to its money-making ways. After that slump in 2001, the company's revenues went up in 2002-3 and by the next fiscal, the turnaround was complete.

"In many ways I was more nervous with the Indica. That was a time when we were getting into a completely new area of passenger cars. Our CV business was also not in great shape. So there was pressure," Tata himself admits. "Now both our divisions are doing well and making money."

But unlike the Ace, which had to be small and not necessarily inexpensive, Nano had to be both. Wagh knew that as the company challenged its own limitations, its component suppliers had to do the same. "The Nano was as much a dream for us as it was for our suppliers. They have challenged their own capabilities and have helped us in no small way in realising our dream," says Tata Motors Managing Director Ravi Kant.

The engine, alternators, management systems and brakes come from Bosch, transmission comes from Birla's Avtec Ltd, steel from its own Tata Steel, castings from Tata Metallics, headlights from Lumax and batteries from Exide. All these components are different from the standard ones fitted in other small cars and the companies have made concessions and spent extra hours on R&D for the dream car. Some do not even expect to make money with the association.

"Our association with the Nano project is more notional. We do not have major margins and will start making money only after 1-2 years," said P.K. Kataky, Director (Automotive), Exide Industries Ltd.

The challenges did not end with the product alone. In the wake of controversy surrounding the policy on SEZ, Singur in West Bengal, the site for the Nano factory, became a rallying point for protestors. Tata had won the technological battle but a political one still stared it in the face.

Tata lost over four months and there were anxious moments when company officials sometime thought aloud if the project should be shifted. A belligerent monsoon last year did not help matters either. The low-lying factory site was flooded and work had to be stopped. "Thankfully we had not placed any equipment at that time or the loss and the delay would have been greater," says Tata. With the passage of time, both the opposition and rain water receded.

The dream came to the fore four years ago but no one knows how cherished or long standing it is for Tata. The sense of relief on his face was palpable and as he stood addressing the world with the car in the background, he looked the youngest 70-year-old ever.

Ratan Tata's dream has stepped out of its private domain and is awaiting mass approval. Tata Motors will have well and truly arrived.