X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
"The Tata group has internally always thought that they have not had a global strategy." - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • A  A  A
  • Mar 22, 2000

    "The Tata group has internally always thought that they have not had a global strategy."

    'I believe in being fair'. Such advice is not surprising especially if you consider that it is coming from a person that has worked with JRD Tata - Mr Ishaat Hussain.

    Mr Hussain recently joined the Board of Tata Sons as an Executive Director, prior to which he was the Senior Vice President and Executive Director - Finance in Tata Steel for almost 10 years. A Chartered Accountant from England and Wales, Mr. Hussain joined the Board of the Indian Tube Company, which was later merged into Tata Steel.

    Besides being on the Board of Tata Sons, he is the Chairman of Tata SSL Limited and Voltas Limited. He is also on the board of several Tata Companies viz. Tata Steel, Tata Industries, Tata Teleservices, Titan Industries etc.

    In an interview to equitymaster.com, Mr Hussain, Executive Director, spoke on the existing economic and political climate and how the Tata group is placing itself to take advantage of the opportunities in the new economy.


    EQM: Your view on the state of the economy and the political climate in the country?

    Mr. Hussain: The political situation is a lot more stable than we have seen in the last 36 months. But there are some storm clouds gathering. They seem to be taking care of it. One is the RSS issue in Gujarat and the other is the Bihar issue. I thought the BJP would be hammered. But there has been suitable back tracking to accommodate the coalition partners. We have to see how the budget session proceeds particularly when he (Yashwant Sinha) is attacking subsidies. We really have to see whether the partners really cling together on this issue or not. I would just say that there are some clouds on the horizon. The big issue is really the Indo-Pak relations and Clinton's visit and what happens thereafter. The Indo-Pak relation is a worrying aspect as it saps the national energy.

    Economically I think in volume terms the economy is doing excellently. Industrial production grew 9.5% in January 2000. Commercial vehicles and steel are moving very well. Cement and bearings are moving well. These are, what I call, the 'old economy' pulse points. I used to watch how steel sheet and bearings moved.

    Agriculture there has been a bit of a slowdown this year, which is to some expected. We have two good years and then a not so good year and then two good years again. What I think is still under pressure is 'profitability' and that I am afraid in the old economy will still continue to be an issue, till companies really restructure dramatically. I can tell you from our example at Tata Steel and Telco, that the cost cutting has gone very deep. Now I am seeing a downward trend in the cost curve and an upward trend in the revenue curve. That is what all corporates will have to do. Profitability is still not at the levels at which one would like to see. But that I think is a structural issue. I think many corporates are addressing this issue.

    Then of course there is the hype over the information technology sector where we are doing extremely well. As you know IT exports have already risen to US$ 4 bn. Although it is on a small base but it is a hell of an achievement. Could we have forecast this even three years ago? In the new economy we are well positioned to take the advantages. If the old economy picks up and the engine is the new economy then I think a growth 7-8% growth rate is within our target range. I am very optimistic on this.

    Interest rates are going southwards. The fiscal deficit - disappointed that he (Sinha) did not make deeper cuts, but everyone is talking about seriousness of the situation. When everyone starts to talk about it reasonably knowledgeably there is every chance that in the years to come even that will start coming down.

    One or two things in the budget I think he need not have tinkered with. I really do not see why this dividend tax had to be hiked. Obviously it appears to be a political trade off between subsidies and attempting to hit the rich who get dividend. At least in the short term this, as we have seen, has adversely affected the market sentiment. Overall in the medium term I think we should be very optimistic. WTO is a big question mark for the old economy and the companies better get ready for the round two of tariff cuts.

    EQM: The Tata Group's acquisition of Tetley is being book marked as a highlight in India's quest for a larger market share of the global market. Do you see this as a trend? Do you see the Tata group more actively looking out for such deals?

    Mr. Hussain: Definitely. We have internally always thought that we have not had a global strategy. We basically had a domestic strategy. And I think there are good and fair reasons for that. First of all you have to change the mindset from a controlled and command economy to a market economy. Then from a completely closed economy to a global economy. And I think sequentially the first thing was to address the domestic market and how to make the company more market oriented. And then you broaden your horizons. Go from domestic to foreign. Basically Tetley has given us a lot of insight on how to move in the international markets. We are on a learning curve on that and I think we are reasonably quick learners so we now have the expertise on how to put the deals together overseas and arranging the finance. Certainly, the group knows that if there is a good opportunity, which fits in with the strategy of a particular company in the group we take can take advantage of it.

    EQM: If you look at the Asian crisis about two years ago there were many opportunities for other group companies like Indian Hotels to pick up properties abroad or maybe Tata Engineering on the car side. Were you not able to close deals or was there no desire to do so.

    Mr. Hussain: No. I think in East Asia though you could pick up hotels very cheap in say Bangkok the sellers were very reluctant to sell. I understand that despite the low valuations, not many deals were done.

    We had detailed discussions with two or three investment bankers. We had expressed to them very clearly that if they know of some good opportunities they should come back to us. But they did not. The problem was that there were no sellers. The companies held on. In my view, I am not sure whether Telco is in a position to make an acquisition of a car because they are themselves new to the game. Trucks perhaps yes. Steel, I think we are very close to getting into some sort of fairly detailed negotiations with a Thai party for cold roll and wire rods. I think we would certainly like to broaden our horizons and Tetley has given us the confidence to go ahead.

    I feel very proud that now Indian tea will have an Indian brand being flaunted in markets all over the world. The next thing I think is that we should go and get the Kohinoor (diamond) back.

    It's important that other Indian corporates also start to broaden their horizons and it is then that we will start to become a global economy.

    EQM: The proposed merger of the Tata Groups basic and cellular telephony services operations and the Birla - AT&T highlights the aggressiveness of the Tata group which has been traditionally categorised as conservative…

    Mr. Hussain: The Indian telecom sector is consolidating madly. Bharti has been the leader in consolidation. Max has consolidated its Delhi and Mumbai circles. So in the telecom sector there is going to be consolidation. And if you are not part of that consolidation you will be left back. There is this one Hindi saying that I really believe - 'Samaya balwaan hai'. What will happen today and what is happening is also the question of changing times. I still remember as a child, I was born in Patna, and we did not have the sort of sanitation that we have now. In 50 years India has changed dramatically. Our horizons are very different from those of the previous generation and we get conditioned by a certain standard. So what you will see now is that everybody will work towards their own interest and that is shareholder value. We would destroy shareholder value if we did not combine with Birla - AT&T.

    EQM: So far it has been Autos, steel, fertilisers and chemicals. Where do you see the Tata group five years from now.

    Mr. Hussain: In those industries and also in those that are in the new economy. And I think we are very well positioned. If you really look at our capabilities in IT area, they are quite phenomenal. The size of Tata Consultancy Services (TCS) is very substantial in comparison to any company in the IT sector in India. Wipro and Infosys jointly would just about make it to being the same size as TCS. We are very well positioned to get a commanding position in the new economy. I do not think we can exit the old economy sectors but you will see more of new economy sectors. I see the Tata group becoming major players in financial services.

    EQM: The one place you are not involved is media…

    Mr. Hussain: Media in the form of pure political news I think we would be very weary of entering. But through our own Tata Donnelley we are getting into content - Overdrive is the leading magazine in its interest area. I think we have planned to grow that but certainly we will be in the ISP business. We are going to launch hopefully shortly our own ISP connectivity and we will have our own portals both B2B and B2C.

    EQM: The Tata group has varied interests in the technology sector. Are there any plans to realign these businesses?

    Mr. Hussain: You know what we are going to do is cooperate much more. We will try and cut out the overlap, because this is a very wide field. Tata Infotech for example is into education, Tata Technologies is very advanced in CAD/CAM, TCS is very advanced in programming and software. But what we have also got to see is that they specialise in their own area and if there is an overlap, cut out the overlap. There are also structural problems in merging them. TCS is a part of a private limited company and Tata Infotech is a quoted company. So there are those sort of issues. But I believe there may be areas of overlap, which may cause confusion so we have got to see that the overlapping is managed.

    EQM: On hobbies…

    Mr. Hussain: I love reading. I love reading history.

    EQM: Which three books have influenced you the most?

    Mr. Hussain: One is Great Expectations, which I read as a child. Fantastic story. Dickens in our times was a must. I read a lot of history and therefore this book 'The Rise and Fall of Nations' that I think has provided me a huge analytical framework on evolution of history from a 100 year perspective. I read quite a lot of management books and (Michael) Porter is my favourite. I like analytical frameworks. The Rise and Fall of Nations is a huge analytical framework for evolution of history. Similarly Porter is an analytical framework for business strategy. It's a very seminal work.

    I am a great fan of Amitava Ghosh. I like reading Maratha history, the Avadh dynasty, more of local history. Something about Lucknow, it has one chapter in which this person has written about an Indian going to Britain, which is quite different as in those times people mostly wrote about the British coming to India.

    EQM: Which are the three people who have influenced you?

    Mr. Hussain: That is a very tough question to answer. I greatly admired JRD (Tata). He was a fascinating person. The first question if you took a proposal to him would be 'How would the nation benefit from this?'. I was dumbstruck there.

    I have met some very wonderful people in my life. One very great person was my father in law. He was a General in the Army and he established the National Defence Academy (NDA). I was impressed by his secularism, his love for his country, his sense of patriotism. He was very left wing in his ideas. He had very varied interests. He knew how to make little chutnees and little achaaars. He was a great horseman, an excellent father loved by all his cadets. All the present chiefs including Vishnu Bhagwat are his cadets.

    I was very young about 15 when my father died. He was a doctor by profession. He was a very kind person, always good to his relations, very much a family man. Then there were some teachers and college professors.

    EQM: Which college did you go to?

    Mr. Hussain: I went to St.Stephen's.

    EQM: What is the one piece of advice you would give to all those young people out there, managers, students?

    Mr. Hussain: It would be very arrogant of me to do that. It is anyway too broad a question.

    My only advice is whatever you do 'be fair'. I see very little of fairness around. I see everybody end up saying 'I really clobbered that bugger'. That in any deal if there were ten rupees on the table people want to get away with eleven. Be fair, and if you are, you will be fair in your personal life, fair in your commercial life. You should not have two faces, one at home and the other at the office. Be fair to your seniors, colleagues, and subordinates. I am great believer in fairness.

    If you are fair you will always get a deal done. Apart from that it is also a moral issue. It's the fabric of society. It's a give and take. Not take, take, take….

     

     

    Equitymaster requests your view! Post a comment on ""The Tata group has internally always thought that they have not had a global strategy."". Click here!

      
     

    More Views on News

    Tata Steel: A Strong Quarter (Quarterly Results Update - Detailed)

    Aug 12, 2017

    Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

    Tata Steel: Strong Quarterly Performance (Quarterly Results Update - Detailed)

    May 22, 2017

    Tata Steel reported a robust operating performance on the back of strong domestic and European operations.

    Tata Steel: Domestic Realisation Disappoints, Loss continues... (Quarterly Results Update - Detailed)

    Dec 19, 2016

    Tata Steel has reported a 0.1% increase in the topline while the bottomline was in red in 2QFY17.

    SAIL: Loss at EBITDA Level Due to Higher Raw Material Cost (Quarterly Results Update - Detailed)

    Jun 12, 2017

    The company registered a negative EBITDA of Rs 2.64 billion during the quarter. This is on the back of an increase in raw material prices.

    Tata Steel: Loss from Discontinued Business Mars Performance (Quarterly Results Update - Detailed)

    Sep 27, 2016

    Tata Steel has reported a 6.3% decline in the topline while the bottomline was in red in 1QFY17.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TATA STEEL SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK TATA STEEL

    • Track your investment in TATA STEEL with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    TATA STEEL 5-YR ANALYSIS

    Detailed Financial Information With Charts

    COMPARE TATA STEEL WITH

    MARKET STATS