There used to be a hotline between Jamshedpur and Bombay House. So, one day in 1987, Russi called me to his office, got on to the line and said, “Get me JRD.” I asked him if he wanted me to go out, he replied, “No”. And after a few pleasantries, Russi said on the call, “You know Ishaat. We make him the finance director after Kassem Patel retires.” I was pleasantly surprised and in 1989, I came to Bombay House. It was also the period when India was changing its contours and about to embrace liberalisation.
I worked with Ratan Tata very closely when he became the chairman of Tata Steel in 1993. Though the transition from Russi to Ratan saw an unseemly tussle between them, the good thing was that we were never involved in such matters. While one had to be cautious and sensitive, there wasn’t animosity on a day-to-day basis. In fact, Ratan had the greatest respect and regard for Russi. If one were to ask Ratan today, I’m sure he would say that Russi’s management capabilities were exceptional. But we all make misjudgements and I believe Russi’s abrupt departure was on account of one such misjudgement on his part.
Reflecting on my years at Tata Steel, two events stand out in my memory. The first one is when liberalisation swept through the shores in 1991; duty on steel was brought down to 5-10% from 60%. Suddenly, Indian steel had to compete with imported steel. Tata Steel’s facilities were largely old and obsolete. On the other hand, steel prices were decontrolled. My colleague, R Sankaran, in Jamshedpur prepared a forecast for the financial year 1993-94, which was alarming. He called me on the hotline and informed me, “Boss, we are in deep trouble.” In addition, the working capital situation turned dramatically adverse, as earlier we used to collect cash in advance before we sold steel, but now, everyone was asking for credit. I went to Ratan and informed him about the existential crisis that TISCO was facing. He immediately rang up Jamshed Irani to brief him of the situation and asked him to come to Bombay urgently with his senior colleagues. Soon, a meeting of the top management of TISCO was held in Bombay and two taskforces were set up — one to cut costs and the other to maximise revenues. As a result, a dramatic turnaround was achieved, and we completed the fiscal year with a reasonable profit of Rs.1.2 billion. This was a classic case of determined leadership and outstanding teamwork. It exemplified the spirit of Tata Steel.
The second major event was the acquisition of Corus. Much has been written and commented upon about the merits and demerits of the acquisition, largely with the benefit of hindsight. I am very clear that it was a bold and correct decision at that point of time. Tata Steel’s debt position was comfortable and it had additional debt capacity. The debt taken for the buyout did not cross any dangerous threshold. It also needs to be remembered, that Tata Steel was in danger of becoming marginalised, as it was merely a three million tonne steel producer. Arcelor had already reached a capacity of almost 100 MT and even the newer Indian private sector players had caught up. Tata Steel’s efforts to build a new plant had run into problems around land acquisition, thus a sizeable acquisition became a strategic imperative. It is against this background that the Corus deal has to be viewed. While a careful risk assessment had been done, however, a black swan event occurred — the 2008 financial crisis. Nevertheless, starting with the Corus buyout, its subsequent expansion and acquisition in India, Tata Steel, today, has once again emerged as a serious global steel player.
Undoubtedly for me, the landmark event of my career was the Tata Consultancy Services (TCS) IPO in 2004, which was a difficult decision to make. The debate about the listing had been going on for more than a decade, even much before I had joined Tata Sons. The dilemma facing Tata Sons was that how would it fund itself if it did not have unfettered access to the cash of TCS once it became a separately listed company. It took some effort to convince the board that even after listing TCS, Tata Sons would continue to hold 80% of the company. Also, given the high level of free cash flow that TCS was generating by following a reasonably high but prudent dividend policy, Tata Sons would be able to get sufficient funds for its requirements. In addition, Tata Sons would have a huge liquid monetisable asset, which it could cash in on without significant dilution. History has shown that the listing of TCS was again a game-changer for Tata Sons and the group as a whole.
Once the board agreed to take TCS public, the process of the IPO involved solving some interesting technical issues, particularly in the area of taxation. Moreover, there was a concern that what would happen if Tata Sons didn’t get the right price for its shares, because the demerger of TCS from Tata Sons was an irreversible process. Here again, a most unprecedented structure was put in place, which made the pricing of the IPO a condition precedent for the demerger. In other words, if Tata Sons was not satisfied with the discovered price, TCS would continue to be a division of Tata Sons. I recollect several interesting interactions in the run-up to the IPO and one particular instance that comes to my mind was when I personally approached the then IT minister Pramod Mahajan, who picked up the phone and spoke to the then finance minister Yashwant Sinha, explaining the importance of making certain valid amendments to the I-T Act so that Indian companies could carry tax efficient ways of restructuring their businesses to access the capital market. The entire IPO effort was an exhilarating experience and at the time of listing of TCS on the Bombay Stock Exchange, I said that the opportunity I got of leading the team for the groundbreaking listing was perhaps a reward for the good karma of my past life.
While I enjoyed heading the finance function of the group, I preferred the cut and thrust of general management. While I never was a CEO — since I lacked one of the attributes of being ruthless, bordering on brutality — I do believe, in all humility, that I did justice to my role as chairman of several Tata companies.
The journey at Voltas and Tata Sky is something that’s close to my heart, especially Tata Sky, a business that I nurtured from day one till I retired in 2017. Today, it’s arguably the leading direct-to-home (DTH) player.
At Voltas, when I took over the chairmanship from AH Tobaccowala in 2002, it was a Rs.2 billion market cap company. It had the HVAC business, the MEP business in the Middle East, the textile machinery business, acting as sole selling agent for Lakshmi Machine Works, Voltas was also making room ACs and did contract manufacturing of refrigerators at its Hyderabad factory. After Voltas had sold the white goods business (refrigerator, washing machine, dishwasher) to Whirlpool in 1996, the Hyderabad unit was left out of the buyout, as it was unviable. The big challenge now for Voltas was to shut down the facility, which had around 2,000 employees, as it needed cash. The union leader at the facility was the formidable Janardhan Reddy, with a reputation of being brutal. The HR head arranged a meeting between Reddy and me. At the meeting, he sat wide legged eating paan, so I, too, sat in a similar posture, and asked for a cigarette (though I am a non-smoker) and feigned to smoke.
I learnt all this posturing from Russi, who said negotiations are all about play-acting. Reddy took a tough stance, but I put my foot down and we couldn’t come to an agreement. The unit was shut for a few months, but Reddy realised that Voltas was not buckling. He was bargaining for a severance package, which Voltas just could not afford. Here’s where luck struck again. Chandrashekhar Reddy became the CM of Andhra Pradesh and he disliked Janardhan since he, too, had vied for the CM’s position. Ashok Soni, the Voltas MD, met Janardhan in the presence of the CM who ruled that the Voltas offer was very fair, and permitted the closure of the unit.
After the closure, Voltas was painstakingly built with the room AC business becoming the growth engine. After a couple of years of handsome profits in the MEP business in the Middle East, we went through a difficult few years in Qatar and Dubai. Mercifully, we got through the difficult period on the back of a stellar performance from the room AC business. I must give credit here to Noel Tata, who had joined the board as a director, and had said: “Ishaat, do anything but we will not give up the AC business, this is a huge market. Everybody wants an AC.” He was instrumental in persuading the board to pursue with the room AC business as it, too, was a candidate for divestiture. As they say, the rest is history — when I retired from Voltas in 2017, it was gratifying that its market cap was Rs.170 billion.
One of the great regrets of my career was the inability of the group to make a success of the telecom business, which floundered right from the start, primarily because of an inconsistent regulatory environment. Ratan was distraught at the unfair competition as the incumbents were manipulating the rules of the game. We burnt a lot of cash, and, finally, had to pull the plug.
There were also some unpleasant episodes that I had to deal with. The most difficult one was the Tata Finance fraud, orchestrated by Dilip Pendse, who was a ‘grace-and-favour’ manager. What came to light later was that he was a great punter in the stock market. Prior to this episode, when he had showed up at my office one day, I had asked him: “Dilip thode paise hai, yaar kya karein.” He immediately said, “Lao, cheque kaato.” I wrote a cheque and gave it to him. What I didn’t realise was that he was playing the market. If he made a loss, he would pass it on to a subsidiary of Tata Finance, which he was funding through the parent. At the end of the year, entries would be passed, and it would be reversed in the beginning of the following year — a classic case of window dressing. So, there was a huge borrowing in the subsidiary, which the board failed to pick up, although it was very obvious. In fact, when the news broke out in the press, Dilip called me from Dubai telling me that he was being framed by certain vested interests. I unknowingly, too, said, “I understand.” But, unfortunately, that wasn’t the case.
I had never seen Ratan as angry as he was when he confronted Dilip and sought an explanation. At the end of the meeting, Dilip said, “Sir, just give me Rs.3 billion and I will settle this,” That was it. Ratan just lost it and yelled at him: “How dare you! How dare you even make this proposition to me!” After he left, Ratan turned to me and said, “We must do whatever we have to” and I knew what that meant. We immediately announced that Tata Sons would stand behind all the liabilities of Tata Finance. Secondly, there would be no cover-up to save anybody. I was sorry to see Dilip go to jail and, eventually, the case ending on a tragic note.
Then, of course, the controversy around Cyrus Mistry’s exit. My own role in this has perplexed many — while on the one hand, I abstained at the board meeting on the resolution which sought Cyrus’ removal, on the other hand, I was the Tata spokesperson at the AGMs of some of the group companies which sought his removal as chairman of those companies. Incidentally, Cyrus withdrew his objections from all companies, other than TCS where a vote took place. The fact of the matter is that the issues involved in the two cases were very different and each needed a different response, based on one’s understanding of the position in each case, free from any agenda or bias. In both cases, just like Arjuna in Mahabharata, I was doing my dharma.
Over the years, there have been many learnings, but there are two that I would like to dwell upon. For me, leadership is an enormous responsibility with a huge duty to care for those for whom one is responsible. Leadership also requires the leader to make personal sacrifices when required, therefore, before one accepts a leadership position, one must seriously consider whether one is ready to accept the challenges that go with it.
In the modern era, a leader cannot afford to be individualistic and egoistic. He must have an abundance of emotional quotient and empathy. In other words, he must be ready to accept the concept of shared leadership. The day of the superman CEO is over. At Bombay House, I’ve seen quite a few CEO successions and I always felt that looking for a ‘superman’ is fraught with danger. You have to look for a leader who believes in collective leadership and, therefore, is instrumental in building a good team.
Having talked about leadership, in today’s times, it’s sad to see the rampant rise of unethical behaviour in general and also in boardrooms. The behaviour of an organisation is set by the “tone at the top”. I believe there is an imperative need for all of us to reflect on our behavior and whether we are acting with a clear conscience. That’s is what dharma is all about.