A succession battle is underway at one of India's most powerful conglomerates
Panel finds there is only one Ratan Tata for India
MUMBAI // The giant Tata Group's hunt for a successor to its chairman has run into fresh trouble after its search panel said it could not find a candidate to match the departing head's global experience and business reputation.
Ratan Tata is due to retire next year after turning 75, vacating what is widely billed as the top job in corporate India, at a group that is valued at US$70 billion (Dh257.1bn). A five-member panel was set up last August to nominate Mr Tata's successor by last month.
"Our committee has come to the conclusion that we cannot find a replacement for [Mr] Tata," RK Krishna Kumar, who heads several of the group's companies and is a member of the search panel, said on the group's website.
"[Mr] Tata is a born leader. He has a place in the history of post-independence India. We may have to change and rearrange the model in terms of what we are looking for."
Family-run enterprises are the backbone of the Indian economy, accounting for 95 per cent of all businesses. Together they contribute between 60 and 70 per cent of the country's GDP.
At least half of the top 30 companies listed on the Bombay Stock Exchange are controlled by founding families, including the Tatas, Birlas and Ambanis. Many such families have hit the headlines over bitter in-fighting and acrimonious inheritance battles.
Mr Tata, who is unmarried, does not insist on bloodline succession. His successor, he said last year, could be from within the company or outside, or even an expatriate with adequate global experience.
But the trouble in finding his replacement is symptomatic of the power struggles raging within the second and third generations of family-owned business conglomerates that dominate India's corporate sector.
"Any delay in the selection will cut short the time available for the new person to settle down in his new job, if Mr Tata sticks to his deadline for retirement," warns Professor Kavil Ramachandran, a family business specialist at the Indian School of Business in Hyderabad.
"Leadership succession in such a diversified group is not easy."
Given the Tata Group's enormous size, geographical spread and diversified businesses that include cars, steel, hotels and telecommunications, finding a replacement is no mean task.
The group has 98 operating companies including: Tata Steel, India's largest private sector steel company; Tata Motors, the country's largest vehicle manufacturer; and TCS, its largest software producer. Together they employ almost 360,000 people worldwide.
Under Mr Tata's reign as chairman since 1991 - he is the fifth in the group's 140-year history - the group diversified its businesses and expanded its footprints globally.
He is seen as the driving force behind the group's acquisition of the UK steel marker Corus for $12bn in 2007, then the largest foreign takeover by an Indian company.
The following year it acquired the British car brands Jaguar and Land Rover, and won worldwide acclaim for launching the world's cheapest car, the $2,500 Nano.
The group's overall revenues under him grew from $5.8bn in 1991 to $70.8bn last year. Annual profits rose from $310 million in 1991 to $2.17bn last year.
But Mr Tata is also revered globally for his integrity, making the search even harder, says R Gopalakrishnan, another Tata director.
"The group does not want a person who comes in for just five years, takes stock options and departs to the Bahamas," Mr Gopalakrishnan said. "The next chairman will stay at the helm for around 30 to 40 years."
One of the frontrunners for the position is said to be Mr Tata's half brother, Noel Tata, 54. But he has been criticised by many on Tata's board for lacking experience to run such a large enterprise.
"Finding a successor for a group is very different from finding one for a company," says Parimal Merchant, the chairman of the Center for Family Managed Business at the SP Jain Institute for Management and Research in Mumbai.
"The incumbent successor of the group has to earn the credibility of the CEOs [chief executives] of the group companies. Although technically he will be the boss, operationally he will have very little direct power. He will need the ability to influence without power."