TATA: An Indian Company Wants to Be Everywhere
The NYT writes about the recent bid by Tata Steel to acquire Corus of UK. This would propel Tata’s to #6 in list of the largest steel manufacturers in the world, from their current position below #50.
This year has seen a great deal of linkage between steel and India. Mittal took over Arcelor to become the biggest steel company in the world.
However for all practical purposes Mittal is a Luxemburg based company with operations out of Rotterdam and London.
Tata’s on the other hand is a real Indian company in all senses. Thus I feel that this achievement is all the more significant especially if viewed through the “colonial powers” lens.
MUMBAI, India, Oct. 17 – Across much of the world, India is still thought of as a land of elephants and maharajahs. But one day, it might be known for Tata.
You may never have heard of the Tata Group, but there is a good chance you have sipped a Tata drink, slipped on Tata shoes, or slept in a Tata hotel in New York, London or Sydney. When you last checked e-mail messages, telephoned Beijing or used the Internet phone service Skype, Tata’s 60,000 kilometers, or 37,000 miles, of deep-sea cables may have connected you.
Now, one of the group companies, Tata Steel, is putting the brand name on the world map with a bid to acquire a company seven times its size, the Corus Group of Britain.
Corus said Tuesday that it had received a bid for £4.1 billion ($7.6 billion), or 455 pence a share, valuing Corus at $10.2 billion, including debt.
A deal would create the world’s sixth-largest steel company. The combination could further accelerate deal making in an industry that is merging fast in order to keep up with the largest player, the newly created Arcelor Mittal.
India appears to be emerging as not just a place for companies to outsource, but also a place for entrepreneurs to build multinational companies. The model for Tata, as it spreads internationally, is not Mittal Steel or Infosys, two other giant Indian companies. Its model is the diversified conglomerate General Electric.
It may be difficult for Tata to achieve that grand scale. Tata’s market value, at $47 billion, is equivalent to G.E.’s value back in 1992, but only an eighth of G.E.’s value today.
Still, Tata is quietly shopping the world. It spent
$1.5 billion on foreign acquisitions last year. It is the largest seller of whole-bean coffee in the United States, with its Eight O’Clock Coffee brand, which it acquired in June. With Tetley of Britain, which it acquired in 2000, it is the world’s second-largest brand of tea, behind Lipton. In August, it bought 30 percent of Glaceau, a United States maker of bottled water containing nutrients.
Tata is also on a quest to spread its Taj hotel chain, recently paying $170 million for the Ritz-Carlton in Boston. It already owned the W Sydney hotel, and the Pierre in New York.
“We are not globalizing to go out there and teach, that’s for sure,” R. Gopalakrishnan, a Tata executive director, said in an interview in his Mumbai office.
“We’re globalizing because we think the learning of that acquired company and our learning together add up to three.”
Critics of Tata’s globalization spree say the group has tended to overpay for foreign acquisitions, partly on the belief it can cut costs from the operations.
Analysts have said Tata’s beverage arm has taken on a heavy debt load; now Tata Steel, nearly debt free, will have to assume debt to buy Corus, putting pressure on its status as one of the world’s most cost-efficient producers.
At home, Tata still focuses much of its marketing and product design on low-income consumers. “We want the brand name to be international and, at the same time, at the bottom end of the economic pyramid,” Ratan N.
Tata, the group’s chairman, said in an interview in 2004.
Tata’s success comes in part from treading lightly in overseas markets. It benefits from an image as the un-multinational – a company that goes to places like South Africa and Bangladesh saying that it wants to learn rather than teach or merely seize market share.
Though Tata has been around for more than a century, it was a sleepy family enterprise for generations. It was only recently, after Mr. Tata took over in 1991, that the company’s renaissance began. He injected discipline into the group, threatening to sell underperforming divisions and mandating greater coordination among the units. He also built up the largest Asian software company, Tata Consultancy Services.
Alan Rosling, a Tata executive director leading the international expansion, said the company’s greatest challenge was to evolve beyond its reliance on India’s low-cost base by developing innovative products. “In 30 years’ time, we’ll be a big company on a world scale,” he said. “But we’re not there yet, and we have a long way to go.”
The Tata Group, though, has cultivated a kinder, gentler side, possibly the result of sprouting in the middle of a country that is still overwhelmingly destitute. The family’s holding company, Tata Sons, is owned by charities, with two-thirds of its profit going to philanthropy.
“We’re making money,” Mr. Rosling said, “in order to give it away.”
Anand Giridharadas reported from Mumbai, and Saritha Rai from Bangalore. Heather Timmons contributed reporting from London.