Tata starts search for his successor

Ratan Tata, 72-year-old chairman of the Rs3,25,000-crore Tata group, has finally begun a formal search for a successor.

Unlike his predecessor JRD Tata, who left the decision till the very end, Ratan Tata has appointed a five-member committee to select a successor well before he formally retires at age 75 on December 28, 2012. He was named chairman of Tata Sons in 1991.

In a brief announcement on Wednesday, Tata Sons, the group’s key holding company, said that the committee included one member from outside the group.

Two-thirds of the group’s revenues come from outside India after the acquisition of Corus Steel and Jaguar-Land Rover. The group has operations in over 80 countries and is the largest private sector employer in India with over 3,50,000 employees.

While no timeframe has been set for naming a successor, the expectation is that the announcement will be made within the next 12 months, so that he gets enough time to learn the ropes before Ratan Tata hangs up his boots.

In an interview to a business magazine, Ratan said that his successor would need up to 18 months of handover time. “It should not be longer because the way things work, there would be tremendous pressure to unseat that person.”

That statement, made in January, 2008, is a reference to Ratan’s own difficult battle for supremacy as JRD failed to give him a leg up against the group’s strong satraps, who thought they were in with a chance. Russi Mody at Tata Steel, Ajit Kerkar at Indian Hotels, and Darbari Seth at Tata Chemicals were the prime obstacles to his rise to unquestioned supreme.

While the recent appointment of step-brother Noel Tata as managing director of Tata International sent strong signals that he could be a front-runner, the announcement of the five-member committee indicates that the choice may not be limited to him.

At a conference last year, Ratan had said that he would be looking “both within the organisation and outside’’ for a successor. “It would certainly be easier if that candidate were an Indian national,” he said, but added enigmatically that he wouldn’t rule out “an expatriate sitting in that position”.

Group insiders, however, think that is unlikely given the huge cultural gap an outsider would have to bridge to run a diverse group headquartered out of India.

What also works in favour of Noel Tata is the Tata name - something JRD too felt was important when he was deciding his successor. The fact that Noel Tata is the son-in-law of Pallonji Shapoorji Mistry, the single largest individual shareholder in Tata Sons with a holding of around 18%, helps. Interestingly, Pallonji Mistry’s son Cyrus Pallonji Mistry is also on the board of Tata Sons.

Whoever succeeds Ratan Tata will find his shoes difficult to fill, but it will at least be a unified group with its shareholdings substantially consolidated. Unlike JRD, who didn’t think much about ownership issues and instead gave his chief executives a great deal of freedom to manage, Ratan Tata has given the group a more cohesive identity with Tata Sons as the core holding company.

Founded as a trading entity way back in 1868 by the legendary Jamsetji Tata, Tata Sons holds stakes ranging from 25% to 75% in all major Tata group companies. It also owns the Tata brandname. Chairmanship of Tata Sons is thus tantamount to control of the Tata group.

A bachelor who likes his privacy and his dogs, Ratan Tata has three siblings - a brother Jimmy and two sisters. Noel Tata is his step-brother and son of Simone Tata.