Introduction: One article reveals the past and present of Tata Group!
Author: Ma Ye, Yan Poker Content Team Reproduction Please contact Poker Author Jun (ID: puoker) for authorization
India has recently become a hot topic. Firstly, Modi’s currency exchange policy has caused chaos in the entire Indian economy, and secondly, the power game like power struggle between the two major Indian families has attracted widespread attention.
On the 24th of last month, less than 5 days before India’s most important traditional festival, Diwali, Tata Group’s holding company, Tata& Sons held a board meeting and issued a statement dismissing the chairman of the group, Cyrus Mistry.
On October 26th, the dismissed Cyrus Mistry began a retaliatory counterattack, writing a five page letter and sending it via email to the directors and trustees of Tata Holdings, complaining about the company’s lack of effective corporate governance and questioning the various bad and suspicious merger and acquisition deals promoted by his predecessor, Ratan Tata, before leaving office.
Especially in overseas mergers and acquisitions, including the acquisition of Corus Steel Group in the UK, a joint venture with DoCoMo Telecom in Japan, and a joint venture with Singapore Airlines, it is claimed that these suspicious transactions will result in Tata Holdings having to apply for a debt write down of 118 billion yuan (RMB) in the future.
The two largest stock exchanges in India have expressed vigilance and have requested 27 listed companies under Tata to disclose relevant information.
On October 27th, Tata Group released an eight paragraph statement, which did not respond to Cyrus Mistri’s allegations of suspicious merger and acquisition transactions with his predecessor, Ratan Tata. Instead, the statement accused Cyrus Mistri of being detached from Tata’s corporate culture and spirit, making baseless accusations against Ratan, and acting recklessly.
At the same time, in response to the accusation of manipulating the power of Cyrus Mistry to make him a lame duck, the board of directors has fully authorized him, but has lost confidence in him because he has been unable to solve the business difficulties faced by the company that the board is concerned about.
The statement also stated that the Tata family has contacted some goodwill sovereign funds to prepare for the acquisition of the shares held by the Sellers Mistry family in the Tata Group. At the same time, Tata Holdings, controlled by the Tata family, and Cyrus Mistry have filed separate lawsuits with the court. The biggest economic dispute in Indian history seems to be on the brink of erupting.
After the announcement of Tata Holdings’ expulsion of Cyrus Mistry, the stock market value of Tata Group’s subsidiaries evaporated by 55 billion yuan within 3 working days. The Securities and Futures Commission of India has issued a statement requesting clarification from Tata Group regarding the issue of Cyrus Mistry’s 118 billion debt write down. The once proud corporate governance model of Tata has attracted nationwide attention in India.
This is the first time that such a large Indian Tata enterprise has been publicly torn apart.
After three generations of inheritance, Tata’s performance has continued to grow. J.R.D. Tata and Ratan Tata have strictly adhered to the Tata family code of conduct throughout their careers, which is the integrity and sincerity represented by the brand. The bank will do business with Tata based solely on the words of this business tycoon. Has the situation changed in the hands of the fourth generation Cyrus Mistry?
Cyrus Mistry is not a member of the Tata family, he belongs to the 180 year old Pulgi Palongi family. The Shapulji Palongji family has been acquiring Tata’s equity since 1936, and today holds 18.4% of all Tata’s equity, making them the largest single shareholder of the Tata Group. The Tata family holds less than 1% of the nominal shares, but carries the weight of nearly 10 charitable trust funds, controlling 66% of the voting rights. This civil war has expanded into a great battle between two families.
In the face of constant competition, people are focused on the Tata family. What happened to the Tata company? What problems have arisen in the process of inheriting Tata’s corporate spirit?
Please follow the poker investor to uncover the past and present of Tata, this Indian giant.
Tata’s Wealth History
There are almost no areas in India that Tata has not been involved in. There is a common saying that people wake up in the morning with an alarm clock produced by Tata, go out in a Tata car, pass the steel bridge built by Tata, enter a Tata owned enterprise to work, make phone calls with Tata Telecom’s mobile phone, buy food at a Tata owned supermarket after work, and then go home to drink tea produced by Tata. The lives of Indians are closely linked to this company.
It is the largest corporate group in India, with a history of 148 years and over 100 subsidiaries, including 29 listed companies, with a total market value of approximately $120 billion. Approximately 7.8% of the total corporate market value of the Mumbai Stock Exchange. Its holding company is Tata Sons, and 66% of its equity is held by a series of charitable trusts. According to the relevant personnel of Tata Group, there are more than 10 funds in total, of which the main ones are controlled by two charitable funds.
After more than 140 years of development, Tata Group has expanded its market to over 80 countries. However, only five terms have changed from founder to current CEO, and its business covers consulting, power, communication, automotive, steel, hotel, beverage, chemical and other fields. This legendary national brand, born in mysterious India, has gone through a transformation from having 300 subsidiaries to over a hundred, with listed companies condensed from over 40 to 32. How have various generations of families struggled over the past 100 years?
In history, India was a country that was extremely lacking in soil for the development of national capital. British colonial rule and strict caste system oppression made it difficult for national capitalism to rise, but Tata stood up. The caste system in India, with a history of over 3000 years, has cultivated a large number of followers, whether local or foreign rulers, who can rule India at a very low cost and gain significant benefits.
In the middle, although India underwent land reform, the actual land reform was not thorough, and it still retains the feudal small-scale agricultural production model under the landlord tenant farmer production relationship. Under the caste system, social division of labor is absolutized and hereditary, and everyone has a defined future. To change, one must wait for the afterlife.
If a Chinese businessman wants to invest in India, the first problem he needs to face is the issue of land and labor, followed by the backward infrastructure and complex bureaucratic system in the area.
There is a joke online: India’s population consists of one hundred million people and one billion livestock, which refers to the phenomenon of talent shortage in India. Illiterate and untouchable people are everywhere, and those elites with a population of one hundred million, partly due to the complex bureaucratic system in the country, have achieved success in the UK, Singapore, and around the world. However, foreign investors do not have much available labor force to choose from.
If an investor wants to develop a piece of land and build a factory in Mumbai or Kolkata, what he needs to do is not simply find the Indian authorities to eat, pay some money, or sign an agreement, but to see which class and landlord the land belongs to, because Indian land does not belong to India as a country.
This is the legacy left by the land reform, and the longer it lasts, the more it drags down the Indian economy. China has always been regarded as a hypothetical enemy by India, but in fact, if India wants to surpass China, it must undergo several truly bloody revolutions.
If a foreign family business can develop and grow in such a soil, there must be admirable aspects.
The Migration of the Tata Family
In the 8th century AD, when the predecessors of the Tata family, the Parsi people, migrated from Persia to Gujarat, India, India was under British colonial rule. As a foreign ethnic group, they are not bound by the caste system, have open-minded ideas, are easily receptive to new things, pay attention to education, and have a significantly higher cultural level than other Indians.
In the mid-19th century, the ancestor of the Tata family, Jaime Shetty Tata, studied modern knowledge in schools founded by British colonizers and became an elite class with a strong sense of identification with Britain. For a period of time, major trade with China was operated by Parsi people. Through long-term business and working with the British, Jaime Shetty Tata gained both funds and experience, becoming one of India’s earliest comprador merchants.
In 1857, a national uprising against British rule broke out in India, and the colonial “spokesperson” British East India Company withdrew from the subcontinent. The British government stepped forward and began direct management, officially incorporating India into the territory of the Empire of Never Setting Sun. In the 1970s, during the American Civil War, Indian cotton became an important source of cotton for the British textile industry. The quantity and price of cotton exported to Britain began to increase significantly, and silver flowed continuously into India. Mumbai exporters became wealthy overnight.
At this time, Jaime Shetty Tata visited the textile industry in Lancashire, England. In addition to being impressed by the efficiency of modern textile factories, he was also shocked by the hellish working environment there. What he saw in front of him was the dark corners beneath the splendid appearance of the British Empire, where people worked day and night in the cold north. Children were paid a penny a day to crawl in and out of the textile machine, picking up fallen cotton wool. The poor seemed to have no chance of changing their fate except for being desperately exploited.
At the same time, he also discovered how India was colonized by Britain. Cotton from India is first transported to Lancashire, where it is processed, spun, and woven into fabric before being exported to India. This deeply hurt him, and he decided to set up a factory locally in India, creating a self-sufficient and enslaved India!
James Shetty, Founder
From Textile to Steel Dream
Tata’s predecessor was a textile factory. In 1877, Tata’s new factory was officially put into operation and named the Queen’s Textile Factory. And the first to implement an eight hour workweek, pension, and dividends. Subsequently, the Swadshi Textile Factory was established in Mumbai.
After witnessing the flourishing industrial revolution in Britain and America, he believed that India’s freedom must be built on a solid industrial foundation, and proposed three lifelong goals: to establish a steel plant, a power plant, and a world-class research institution.
During the last 22 years of his life, Jaime Shetty worked tirelessly to establish India’s first steel plant. In 1900, he arrived in the rising industrial power of the United States and, through the introduction of industry insiders, found the internationally renowned exploration expert Charles Page Perin. And strongly invited Palin to India to serve as his consulting engineer.
Unfortunately, exploration has not yet begun, and James Shetty’s heart is starting to deteriorate day by day. And he told his last wish to his cousin R.D. Tata. However, the spiritual wealth left by James Shetty established two principles for the descendants of the Tata family: entrepreneurs must be loyal to the country at the top, and loyal to employees and shareholders at the bottom.
According to the tradition of the old Indian family, the eldest son Dorabji Tata took over as the chairman of the Tata family, and with the strong assistance of his uncle and younger brother Ratan Tata, continued India’s steel dream.
The first two large-scale explorations were abandoned due to insufficient water sources around the mining area, until 1907 when they chose a place called “Sakchi”. The initial construction of the factory required an investment of £ 2 million.
At that time, the wave of India’s boycott of British goods was sweeping from Bangladesh to the whole of India. Therefore, at the Tata office in Mumbai, from early morning to late night, it was crowded with subscribers, including ordinary people, wealthy merchants, and even princely princes. In three weeks, 8000 investors bought a stake worth 1.63 million pounds, with the Tata family accounting for 11% of it. Finally, the King of Gualio purchased the remaining 400000 pounds of equity alone.
Since then, India’s first steel plant has become the world’s leading steel plant in terms of production efficiency and environmental standards.
After completing the steel dream, university became the next goal. In 1911, the Indian University of Science and Technology was established in Bangalore, and today it attracts 2000 young researchers every year, including a Nobel laureate. This continues the ideal of Jaime Shetty during his lifetime, as he had established a huge scholarship that supported over a quarter of Indian students studying in Western countries such as the UK.
In 1918, at the young age of 47, Ratan passed away at a young age. In addition to his grief, Darabuji resolutely decided to establish a trust foundation in the name of his younger brother. In 1919, the Ratan Trust was officially established, and all of Ratan’s assets were incorporated into the foundation. The funds were used entirely for education, charity, industrial support, and national construction, pioneering the Indian charitable trust fund. The descendants of the Tata family have always adopted the same approach towards the wealth they create.
Subsequently, Darjee led by example and announced the donation of all his assets to establish the Darjee Trust Foundation.
This move not only completely dilutes the company’s equity held by the heirs of the Tata family, but also, through a redesigned corporate control structure, enables the Tata family to successfully surpass traditional family businesses and transform into a true business family. It not only maintains effective family control over the enterprise, but also avoids many problems that may arise in inheritance, such as monopoly, sibling division, and offspring disputes.
This also continues Jamshettji’s consistent idea that the wealth of the Tata family belongs not only to their descendants, but also to the Indian people.
Conqueror: J.R.D. Tata
Seventy days after the death of Jaime Shetty, R.D. Tata’s second son was born in Paris, and the couple gave the child a Parsi name: Jehangir, meaning the one who conquered the world.
At the beginning of the 20th century, Paris was the cultural capital of the world, and pilots were the greatest heroes of that time. JRD Tata’s dream has always been to become an Air Force pilot. At the age of 24, JRD Tata became the first Indian to obtain a flight permit. His second dream was to study engineering at Cambridge University, but in the end, he returned to India at the call of his father and joined the Tata family, starting as an unpaid apprentice and regretting for the rest of his life that he could not receive higher education.
JRD, who is 20 years old, gave up his elegant life in the art capital and returned to Tata. Shortly after joining JRD, they encountered one of the most serious crises at the steel plant, to the point where they couldn’t even pay their salaries. The group chairman at the time, Darabuji, gave up his entire fortune for this.
During this period, J.R.D was sent to the heartland of the Tata family and India’s emerging industries in the steel city, and later received bad news from his father. At this moment, he realized the deep meaning behind his father’s refusal to allow him to pursue further studies at Cambridge University. As the train approached Mumbai, the mission of the family successor quietly descended upon him.
At this point, India feels more like a foreign land to 22-year-old J.R.D., as he spent his teenage years in France. Looking around, he could hardly find any reliable relatives or friends, except for inheriting his father’s permanent management position and the debts he carried.
The first thing JRD needs to do is to sell the family’s house and remaining properties to pay off the debt owed to Daolajibu and the group. As a punishment from the group, his starting salary plummeted and the lowercase desk was arranged next to John Peterson, the supervisor of Tata Steel. From then on, this Scotsman became a mentor and friend to J.R.D., and J.R.D absorbed a passion for constantly pursuing perfection from him.
Establishing Tata Airlines
In the early stages of operation, J.R.D focused almost entirely on the Indian sky, starting with air mail services. Three years have passed, and the small-scale air mail department has transformed into Tata Airlines, pioneering the aviation industry in India. Under the leadership of JRD, Tata Airlines rapidly took off and became the first publicly held company in the family to go public in 1946. It was renamed AirIndia and began passenger services.
After India’s independence, Tata established Air India International, and JRD, through its unique taste and meticulous involvement, has made it one of the world’s best international airlines.
Tata Airlines is so successful that even the Indian government is salivating. In 1953, Prime Minister Nehru personally came forward, hoping to nationalize the civil aviation industry, including Air India. However, Air India is not only a new pillar of the Tata family’s industry, but also the culmination of JRD Tata’s 20-year hard work. He has written to Nehru several times, but to no avail.
More troublesome issues arose as Nehru hoped that JRD would continue to serve as the chairman of domestic and international airlines after handing over the company. This raised concerns among JRD that accepting this appointment would encourage the government to nationalize other industries with minimal subsidies and appoint industry leaders to serve the government.
As a result, the heads of 18 departments at Tata sat together and engaged in a heated debate over whether to accept this appointment. Finally, considering the ancestral motto of the family’s ancestors’ loyalty to the motherland and the extraordinary personal relationship between JRD and Nehru, Tata sold the airline company to the central government at a low price, with the family retaining only 20% of the equity.
JRD endured the pain of betrayal and corporate kidnapping, and began serving as the chairman of two companies, working diligently for 25 years until the government resigned from his position in 1978. Subsequently, the service quality and performance of Air India plummeted.
In addition to outstanding achievements in the aviation industry, JRD has also led the family to successfully enter many industries such as chemical, automotive, tea, hotel, pharmaceutical, financial services, information consulting, watches, accessories, telecommunications, retail, insurance, etc. during its 50 years in power, and has become a leader in multiple industries such as tea, automotive, information consulting, steel, and textiles.
At that time, Tata became the first family in India. At the same time, with the unwavering support of JRD, the Tata Institute of Basic Research, Tata Memorial Hospital, Tata Academy of Social Sciences, Indian National Institute of Advanced Sciences, and National Centre for Performing Arts have been successively completed.
In 1993, J.R.D. passed away at a Geneva hospital and was buried at the Father’s Cemetery in Paris. With his departure, an era came to an end. India, or rather a touch of nobility belonging to Indians, has forever disappeared.
Automobile and Steel Kingdom
In 1991, despite the many honors surrounding J.R.D. Tata’s retirement, the Tata Group had gradually declined, with a bloated structure and a severe lack of flexibility to respond to India’s economic changes.
At that time, the majority of Tata Group’s revenue came from traditional industries developed during the planned economy era, and the Indian government imposed restrictions on the production scope of many enterprises. Among the more than 300 companies in the Tata Group, the Tata family holds only a minority stake overall. Even worse, most of the Tata companies that serve as pillars are independent kingdoms managed by older people than Bilatan.
In addition, Ratan Tata, the fourth generation heir of the Tata Group, lacks a hint of personal charm compared to J.R.D., as if he was born for the family business. He has never been married, dislikes public appearances, and avoids giving speeches and receiving cheers at meetings. He lives frugally and does not drink or smoke.
From Jaime Shetland Tata to J.R.D Tata, although three generations of leaders have continuously strengthened Tata, they have never left the Indian mainland. Since taking office in 1991, Tata Group has purchased 35 companies overseas, including well-known brands such as steel manufacturer Corus Group and automobile giants Jaguar and Land Rover. Nowadays, there are as many as 96 companies under the Tata Group, with products covering different industries such as automobiles, steel, and tea.
After Ratan took office, he immediately gave the company a big overhaul. At the beginning, generous pension funds were invested to retire these senior managers.
Sell some companies immediately and use this cash and revenue from India’s largest IT company, Tata Consultancy Services, to support those that remain.
At present, Tata Group has only 96 companies, and Tata Sons, the holding company of Tata Group, holds at least 26% of the shares in each company. This makes the management of Tata Group easier.
Creating a Kingdom of Automobiles
Although India only has 200 kilometers of highways, Tata Motors is one of the top 10 commercial vehicle manufacturers in the world, holding 59% of the Indian market share. Seven out of every ten trucks on India’s roads come from Tata. In 1999, Tata entered the passenger car market with a market share of around 16%, most notably its independently developed and designed series of products such as Indica and Indigo.
In 1998, Tata launched its first domestic sedan, the Indica, which failed miserably due to quality issues, and its market sales were less than half of Tata Group’s expectations.
But Ratan did not give up. And believes that the automotive business is a very important part of Tata Group, and also hopes to elevate India’s manufacturing industry to a world-class level. Customers are very dissatisfied with the suspension, air conditioning, after-sales service, and many other aspects of Tata Motors’ first passenger car, the Indica.
Tata Motors immediately pushed 500 engineers to the market and gave them three months to communicate face-to-face with consumers. The company also invites customers to visit the factory and share their experience with technical personnel. It is on the basis of fully engaging with customers that Tata Motors has begun to have the ability to face and correct problems in its cars.
After the launch of the new Indica sedan in 2001, it immediately became a hot selling model. But at that time, Telco suffered huge losses due to the sluggish truck business. After three years of struggling, Indica and the mid size sedan Indigo are now able to completely overcome early quality issues. By 2008, these two models accounted for approximately 25% of the small and medium-sized car market in India.
Tata trucks, Tata buses, and Tata sedans once formed an indispensable part of the work and life of Indian citizens. The automotive industry has become the biggest bet for Osama bin Laden, and according to the most incredible plan from the outside world, he plans to launch a cheap car priced at 100000 rupees (about 2200 US dollars) to the market in 2008.
The Tata NANO, priced at $2500, was officially launched in the autumn of 2008. The price of 2500 US dollars, equivalent to 18000 Chinese yuan, is not yet equivalent to any car in India. Compared with the cheapest basic version of Chery’s 08 QQ3, the NANO is extremely fuel-efficient in terms of power and configuration.
The NANO car has no air conditioning system, no power steering, no radio, and only one windshield wiper. There is no side collision protection beam and no bumper. In order to reduce weight and save costs, Nano car tires do not have inner tubes; For ease of assembly, adhesive technology is used instead of traditional welding, and the small wheels on the car body are also comparable to children’s toy carriages.
Only equipped with one fuel gauge, speedometer, and fuel light. Combined with Chery QQ3, the QQ3’s configuration can be said to be luxurious and rich.
In 2008, Tata acquired the Jaguar Land Rover brand business under Ford Motor Company for $2.3 billion in cash. This acquisition mainly included the two major brands of Jaguar Land Rover, assembly plants, and intellectual property rights of all models. The fact proves that this acquisition has indeed supported an important profit point for Tata Motors.
Expansion of the steel industry
As soon as Ratan took office, he boldly laid off employees in the restructuring of the dying Tata Steel. In 1991, Ratan cut the number of employees at the steel plant from 78000 to 45000. Such large-scale layoffs did not trigger a wave of strikes. In addition to Xiao Latan’s flexible wrist, the emotional accumulation of his ancestors is also an important factor.
After laying off employees to stop the bleeding for the company, Ratan spent $25 billion to replace the outdated equipment in the factory, turning the world’s most backward steelmaking furnace into the most advanced equipment. After the steel plant gradually regained vitality, Little Ratan began to expand internationally without stopping.
Afterwards, Tata Steel gradually entered overseas markets. So far, Tata’s steel business has spread to 45 countries around the world, with manufacturing centers located in the UK, the Netherlands, India, Singapore, Vietnam, Thailand, and China.
The most famous of these is Tata Steel’s $11.3 billion acquisition of Corus, the second largest steel company in Europe, setting a record for India’s largest overseas merger to date and making Tata Steel the sixth largest steel company in the world.
A merger with Corus Steel in the UK and the acquisition of Land Rover and Jaguar Group from Ford Group have propelled Tata into a global multinational conglomerate, surpassing British aerospace company and becoming the largest employer in the UK.
Tata Motors and Tata Steel have both been selected as Fortune 500 companies, making Tata a national hero in India as a former colonial country acquiring the top assets of its suzerain state. 73 year old Ratan Tatar feels it’s time to retire and enjoy a happy life in his later years.
In view of this, the poker investor mentioned at the beginning that Shapoorj Pallonji’s son, Cyrus Mistry, a Master of Management from the London Business School (who studied at Imperial College London), was designated as the successor of Ratan in November 2011.
In December 2012, he officially became the Chairman of Tata&Sons, becoming the second non named Chairman in the history of the Tata Group.
Previously, Cyrus served as the Managing Director of the Engineering and Real Estate business at Shapulji Palongji Group. After taking office, he placed great emphasis on investing in emerging industries, including establishing the e-commerce company TataCLiQ and further extending the group’s business reach into the field of defense technology.
However, Tata Group’s debt became increasingly heavy, and by the end of March 2016, the debt scale had sharply increased to $245 billion. During the same period, due to the global downturn in the steel industry, Tata’s acquisition of European steel assets resulted in heavy debt.
In order to improve financial statements, he has been cutting off some non-profit businesses for several years, including AirAsia aviation business, a joint venture with Singapore Airlines, telecommunications business, a joint venture with DoCoMo in Japan, fertilizer urea business, and Corus Steel Group business.
At the end of March 2016, Tata planned to sell its steel mill in Port Talbot, Wales, UK for £ 1. However, due to the impact of Brexit and recent steel price increases, the company also planned to replace asset sales with a cooperative approach. Tata Steel is the most important steel manufacturer in the UK. Last year, Tata Steel contributed about 70% of the total steel production in the UK, employing 15000 people locally, accounting for as much as 62.5%.
In 2007, when the market was optimistic, Tata Group defeated many competitors and spent £ 6.2 billion to purchase the Port Talbot steel plant in the UK, ranking among the top six global steel companies. The company’s annual production surged from 7 million tons to 26 million tons.
Tata Group planned to integrate its iron ore resources in India and steel mills in the UK and the Netherlands to achieve an annual production of 40 million tons within five years, becoming the world’s second-largest steel group after ArcelorMittal.
More than half of Tata Steel’s revenue comes from the European market. With the sharp decline in global steel market demand, the UK steel industry has entered a harsh winter, and the rise in local production costs has made its European division a drag on the company’s overall performance.
Between 2014 and 2015, Tata Steel incurred a pre tax loss of 768 million pounds in the UK steel industry. Tata Steel claims that the Port Talbot steel plant alone is losing up to £ 1 million per day.
At the end of March this year, the company announced that it would sell the Port Talbot steel plant in the UK. If no buyer takes over, the steel plant with over 4300 workers and other loss making steel companies in the UK will be shut down. Finally, on the 11th, a purchase and sale agreement was signed with the British investment company Gleiber Capital Management.
This is a win-win deal, although the price is only 1 pound, Tata Steel has finally been able to shake off the burden of years of losses, and the buyer Gleiber Company plans to invest 400 million pounds to revitalize the steel plant and achieve profitability within “one year”. Most importantly, this deal has saved the jobs of over 4300 steelworkers in the UK and eased the increasingly tense socio-economic conflicts in the area. Nevertheless, it still cannot change the deteriorating situation of the UK steel industry.
However, due to the Brexit referendum result on June 23, the company has decided to seek a more sustainable alternative solution for its sluggish European business, which is to seek joint integration with partners. In July of this year, ThyssenKrupp began negotiations with Tata Steel to merge their European steel businesses together.
The potential targets of this transaction may include the merger of Tata Steel’s factories in Port Talbot, Wales, Emmerdan, and the Netherlands with some of ThyssenKrupp’s businesses in Duisburg, Germany, to establish the second largest flat steel producer in the European Union, with a market share of 25%. Currently, ArcelorMittal is the largest flat steel producer in the European Union and also the world’s largest steel manufacturer, with a market share of up to 33%.
The Battle between the Two Great Families
This power struggle will harm Tata Group’s giant businesses such as Tata Motors, Tata Steel, Tata Chemicals, and Tata Information Consulting. In addition, Tata Capital was also exposed for illegally borrowing 2 billion rupees to Siva during this mutual attack, and ultimately lost all its capital. However, for many Chinese investors in India, they are more concerned about the extent of the impact on Tata’s real estate business.
The real estate business of Tata Group includes two business segments: Tata Hotels India and Tata Properties. The main brand of Tata Hotels in India is Taj Hotels (including three economy brand hotels, Ginger, Gateway, and Vevanta), which currently has 108 hotels worldwide. It is the most outstanding representative of India’s hotel business and the largest hotel chain group in India, enjoying a very high reputation in India and even globally.
According to Cyrus’ defense letter, Tata India’s hotel business, including its internationalization strategy for overseas operations, has many flaws and inadequacies. Firstly, the high priced acquisition of the Searock Hotel, which had been shut down for 18 years due to being bombed, ultimately revealed that the hotel’s debt scale far exceeded its total investment. The total investment in 2009 was 680 million yuan, while the debt scale reached 1.403 billion yuan in 2016.
In order to expand revenue, Tata India Hotel illegally renovated the hotel and increased its plot ratio to a super high density level of 5.5 on the basis of a planned permitted plot ratio of 2.5. Secondly, the iconic Piere Hotel, located on Fifth Avenue in New York City, under the Taj Mahal Hotel, is struggling to sustain its operations due to high rent.
Although no longer the chairman of Tata Holdings, Cyrus also holds the position of chairman for many heavyweight Tata subsidiaries, including TCS (Information Software Consulting), India’s most valuable company, Tata Motors, Jaguar Land Rover, Tata Steel, Tata Power, Tata Chemicals, Tata Breweries, Tata Hotels India, Tata Telecom, and Tata Industries. The position of any subsidiary in India cannot be underestimated.
It can be foreseen that Cyrus’ dismissal will not be a period, at best it will be a pause. Tata Group is not as lucky as India’s other giant Reliance this time. In the past, the Ambani family had a sibling feud and had a widowed mother to reconcile and arbitrate. Negative news will continue to ferment. Tata Group is destined to suffer a lot this time.
Tata will soon have a new chairman, and Tata’s 660000 global employees are about to witness an uncertain Tata.