Interview: Ratan Tata

(DNA 31/01/2007) Mumbai - DNA Money spoke exclusively to Ratan Tata and key Tata Steel executives, including managing director B Muthuraman, shortly after Tata Steel won the Corus bidding war. Excerpts from their press conference have been added to complete the picture.

The markets have not taken the takeover well. Tata Steel share prices have fallen...

Ratan Tata: The markets have taken a very short-term and harsh view. One often makes the mistake of damning a company when it posts a loss in one year and applauds a company that makes an extraordinary profit in a given year. One has to realise that the life of a corporation is much longer.

I believe there’s tremendous strategic value in the acquisition. Without Corus, it would take us several years to establish our presence in Europe and create brand value. We look at synergies — and it will be substantial. Hopefully, in the future, the markets will recognise we took the right step.

Will there be any changes in the Corus board? Will a new CEO be appointed?

The CEO of Corus (Phillip Varin) will remain the CEO of Corus.

Did the Tatas seek any help from the Indian political leadership to secure Corus?

We didn’t seek any support from the political leadership. The Mittal bid from Arcelor faced some resistance from the political leadership of France and Luxembourg. In our case there was no opposition from any political quarter. In fact, when we met some of the British MPs, they were quite supportive of our candidature. In fact, when we spoke to the British government, they were very pleased that Corus remains within the group of Commonwealth nations and not Brazil or any other country.

When did you start talking to Corus?

It is almost a year since we started talking. It was even before the Arcelor-Mittal deal. When we started talking to Corus, we found a human chemistry and very similar operating cultures. It wouldn’t have worked otherwise.

Have you at any point of time, talked to Benjamin Steinbruch of CSN, your rival for Corus?

Yes. In recent times we have touched base on a couple of occasions. But it was done very peripherally, without trying to bring Corus into the picture.

Did the high 608 pence bid for Corus have a consensus within the Tata Steel board?

If you want a company, you have to pay the price that’s the going price of the company. The final price has been higher due to circumstances that existed. However, as a prudent management we could go only up to a point. We did not reach that point, otherwise we would have walked away.

Have you overpaid? And did you take a wrong call when you pre-empted CSN, by upping your bid to 500 pence in December?

The word overpaid is subjective. If I give you a mundane analogy, if you wanted to sell your house to me, that is family-owned, I can’t buy for less than your quoted price. When we first made the bid for Corus group at 455 pence, hedge funds came into the picture and started buying into Corus shares. That’s why we raised it to 500 pence before the second bidder (CSN) came in.

We also learnt from investment banking circles that CSN may not bid upwards of 475 pence. We wanted to close the issue soon and so we made that higher bid. Moreover, the higher price (500 pence) we quoted later was to remain compatible with the prevailing market price. It wouldn’t make sense to quote lower than the prevailing market price.

After being at the helm of the Tata Group for almost 15 years, how would you look back at your group’s performance?

A lot has changed in the 15 years. I think the underlying driver is that if you want to grow, you’ll have look at growth within your national boundaries and also outside if you want grow globally. Those who have enjoyed the sheltered environment will prefer to remain in India. Companies that are less hindered will go out and fight amongst competitors globally.

What are your targets for the future?

We have set several internal targets. In the future, we’ll see much bolder and bigger moves in whatever we do. We need to enable our younger companies to grow faster and become globally competitive. We need to delegate more to our younger managers and give them the confidence to face the future.

Will jobs be secure at Corus?

B Muthuraman: I don’t think there is anybody in the world who says his job is secure.

When will the merger start showing on the bottomline?

Muthuraman: There are synergies. The benefits won’t plonk themselves onto the bottomline in the first year. It will take full effect in three years’ time.

Will the acquisition impact Tata shareholders?

N A Soonawala (vice-chairman, Tata Sons): The whole equity will be raised by Tata Steel. We are very conscious of the fact that kept to a level in relation to the capacity which is acquired. The debt (raised to buy Corus) is ring fenced which is structured to a level that Corus can maintain.