The Hindu Business Line : Weathering another storm

Just how much difference a year can make. In January 2008, the Nano, produced by group flagship Tata Motors, was unveiled under global media spotlight in New Delhi. The company was complimented as much for bringing out an affordable car for the masses as for the Nano’s cute looks.

As the year winds to a close, the global media is training its spotlight yet again on a Tata group asset, only this time it is for sad reasons. If the Nano is a symbol of a new, confident and resurgent India, the venerable Taj Mahal Palace and Towers, Mumbai, is an icon dating back to an era when India was fighting for freedom and refused to bow before colonialists.

The period between the Nano’s unveiling and the terrorist attack on the Taj hotel has been a turbulent one for the Tata group. There were the occasional reasons to celebrate as, for instance, when Tata Motors bagged the iconic Jaguar Land Rover (JLR) of the UK in March, or when Tata Chemicals became the second largest soda ash producer in the world after its acquisition of General Chemical and Industrial Products of the US in January.

But these successes have been eclipsed by other adverse events that have hit the group, some within its control but most of them not. The standoff at Singur that has delayed the launch of the Nano came at a time when Tata Motors was already grappling with the effects of a de-growth in the automobile industry. Though the project was quickly housed at another location, the damage was done.

Global financial crisis

The turmoil in the global financial markets and the resultant disarray in the leading economies of the West have hit the group companies hard. Tata Steel, which acquired Corus at the peak of the steel cycle in 2007, is now faced with a slowdown in steel offtake and the prospect of layoffs of workers at Corus’ plants. The same steel-making capacity that was an asset in boom times is now a liability as the company has to carry it along in a low operating state.

The global crisis has also come at an awkward time for Tata Motors which was in the process of consummating the JLR deal. The US, the UK and Europe, put together, account for almost half the sales of the two British brands. The slowdown/recession in these economies is beginning to bite into JLR’s sales already. If this wasn’t enough, the company has run into rough weather in raising funds to repay the bridge loan taken for the $2.3 billion deal.

Indian Hotels, owner of the wounded Taj, was already facing headwinds with an anticipated fall in tourist and business visitors to India. The terrorist attack now is bound to scare visitors away, at least temporarily, leading to fall in business. Plus, there is going to be the bill for rebuilding the stricken Taj Mahal Hotel; damages are not estimated yet but they are certainly not going to be minor.

Amidst this, what lends confidence is the top quality management bandwidth of what is undoubtedly the foremost industrial group in the country. With group revenues of $62.5 billion (2007-08), the Tatas also have the financial mettle to ride through any difficult phase. Indeed, the group has successfully weathered many a storm in more than a century of existence. It will have to draw on all those experiences and resources to ride through this one.

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