What the Corus Deal Means to Tata

Chairman Ratan Tata talks about his plans for integrating the steel company and increasing the group's presence on the world stage

The last couple of days have been intense for Ratan Tata, chairman of Tata Group. As India's largest private sector conglomerate, the group accounts for 2.5% of India's GDP, but it hasn't been a major presence on the world stage. That changed this week, when one of the group's flagship companies, Tata Steel, finally acquired British steel major Corus, after a bruising four-month bidding war with Brazil's CSN. With this move, Tata Steel now accounts for nearly 60% of the group's $22 billion revenues. In an e-mail interview with BusinessWeek special correspondent Nandini Lakshman, Ratan Tata discusses the deal and its significance. Edited excerpts of their exchange follow:

How important is size for Tata Steel? And how important is the Corus acquisition in reaching the right scale?

The acquisition of Corus is an important strategic move by Tata Steel, and marks the further unfolding of its global strategy, in which the first moves were the acquisitions of NatSteel and Millennium Steel. Corus gives Tata Steel access to the developed and demanding markets in Europe in unison with a proven brand name. It was not a decision based on making Tata Steel a much larger company. We see potential for significant synergies between Corus and Tata Steel in manufacturing, R&D…logistics, and sharing best practices.

With the acquisition, steel has an overwhelming presence in the group's revenues. How do you see the Group evolving in the future?

Post-Corus, steel may contribute a large portion of the group's revenues. But we also expect significant growth in the group's other larger businesses—automobiles, IT, telecom, power, chemicals, hospitality, among others.

For some years now, the group has had two thrusts. On the one hand, it has encouraged its companies to seek strategic opportunities outside India's national boundaries. We have seen several moves along that path by many of our companies, including Tata Motors, TCS [Tata's software-services company], VSNL [a telecom services provider], Tata Chemicals, Tata Tea, and Indian Hotels.

Group companies have also focused on developing innovative products and services to serve the larger part of the social pyramid within India, as in the proposed $2,200 car and Indian Hotels' Ginger chain [a chain of deep-discount hotels]. These thrusts still have substantial momentum. And we also need to attend to the unfinished tasks of restructuring our portfolio of businesses, making our companies more customer-focused, and boosting innovation, to list only a few items.

Everybody thinks you overpaid for Corus. Your comment?

It would have taken us several years to build a steelmaker with 19 million-ton production capacity from scratch, leave alone establishing it in Europe with a brand name. We feel confident the synergies of the two companies will be quite substantial, and we have satisfied ourselves that the company has in no way jeopardized the interests of the shareholders in this acquisition. I believe that over the next few years, we will all come to think that this was a visionary move.

Are you open to more acquisitions in the sector?

All the elements of Tata Steel's global outlook [have] yet to unfold. The company is clear that the alignment to strategic plans is more important than just going for size. In future, should there be a strategic opportunity which meets its prudential norms and where it also sees a cultural compatibility, it will certainly look at those.

How will you manage the integration? Do you anticipate any job cuts?

We are planning to set up a Strategic & Integration Committee of Tata Steel and Corus, which will have three representatives from each company apart from myself. The role of this committee will be to oversee the progressive integration of the two companies and direct the overall strategy of the enlarged group. This acquisition is not about job cuts. This acquisition is about making an entity more competitive so that jobs can be more secure.

A few years ago, you wanted to know the differences between China and India. How have those insights helped you?

In an effort to understand the difference between China and India, we commissioned a detailed study. An important insight which the study threw up was China's ability to set big goals and to pursue them aggressively. Thinking big and being bold in setting your goals—rather than taking incremental steps—was a key lesson we took away from that study.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE