Ratan Tata's steel will motor along

"Ratan Tata had quite a few wins and quite a few duds as a business capital allocator," Sharma said.

Ratan Tata lived a few hundred meters away in Colaba from where I lived for several years. My personal memories of Ratan Tata are of his leisurely walk with his leisurely Alsatian most evenings at the US Club in Colaba and occasionally at Oval Maidan. The dog appeared fat, but Ratan Tata appeared fit. I was a young man in my late 20s to early 30s at that point in time, making my way into the world of companies and stocks. With Dhirubhai becoming less active because of a stroke, Ratan Tata became the focus of business attention when he ascended the Tata throne.

I watched the Tata corporate machinations play out exactly the way I watched the circus when I was a kid: leaning forward, watching the lion's every move, hoping he would singe his tail when flying through the burning hoops. Nothing singed Ratan Tata's tail. Ratan Tata displayed teeth and talons bigger than any lion's in taming the earlier ringmasters, the satraps, a la Russi Modi, Darbari Seth, Ajit Kerkar, and so on.

(A bit of historical context for our demographic dividend, which has an average age of 25 and wasn't even born then: when Ratan Tata became the almost "figurehead" head of the sprawling Tata group, the group was a collection of companies with no unified strategy or plan, and each of the companies was run by "intrapreneurs" who ran the companies without any group oversight. Russi Modi exemplified this satrap persona, but there was a collection of others as well fitting the same DNA profile.)

The satraps fought valiantly; they were the ringmasters after all. But their whips became feeble. This lion was not backing off. He wasn't coming to heel. One by one, the ringmasters succumbed. Some after protracted legal battles. Some just surrendered to this mild-mannered Colaba resident. And Ratan Tata then became the winner in this Game of Tata Throne.

Once he had control, he set about reshaping the group in his own thinking. And that was to take bold aggressive bets, not just incrementalism. The acquisition of Tetley UK was a big step in that direction in making Tata a global brand. And then in the year 2000 came perhaps the most stunning announcement that the Tata Group had ever made: that it was getting into the passenger car business. This was the equivalent of Nokia, a rubber boots maker, getting into the mobile phone business.

We, at First Global, wrote a very supportive piece of research for this initiative because it was our view that the Tata CV business was extremely industrial and very prone to the boom-bust cycle of the Indian economy. Adding a consumer vehicle business would buffer this volatility. Well, the car business for the first 20 odd years did exactly the opposite: it remained, till recently, a business where nothing worked. Nothing. The Nano, which should have been Chapter 1 in automotive history, does not even today deserve a footnote in the same history. It went into our equivalent of Chapter 11.

In the middle of these 20 years, Ratan Tata made two other moves: acquiring Corus and JLR, around 2007-2008. Corus, to put it mildly, made next to zero sense. And that, at the peak of the steel cycle in 2007, after a 5-6 year bull market in commodity prices. Even baby traders in commodities will tell you that you should buy when commodities are in a bear market and not when they are in a runaway bull market. Ratan Tata bought Corus with a determination that was surprising. He entered into a bidding war with a Brazilian steel company, and the Brazilian, who probably knows commodities better than we do, walked away. Corus wasn't a great deal, even before it became a deal.

But JLR was different. And I owe personal allegiance to this transaction: it turned out to be one of my best 4 AM bets. I looked at the new lineup of JLR vehicles in London in 2009, and back-of-the-envelope calculations made while at dinner at Joel Robuchon later that day told me that JLR was going to be a huge winner. The street was (logically) betting on this 4 AM going to midnight. It (illogically) went to 12 noon instead, and rather quickly. Quick enough for me to (wisely) invest my part profits from this trade into a stunning Jaguar XJ in 2010. We should always give back to society, as they say.

Ratan Tata had quite a few wins and quite a few duds as a business capital allocator. The telecom business was a dud. The retail business was a spud. But then that's what life is all about in business and in investing and capital allocation: it is largely a game of luck that masquerades as a game of skill.

What, of course, was very surprising in his retirement years was his personal investing in which he put capital into several startups. Having come from a traditional corporate background, it was like Mohammed Rafi starting to sing rap. And decades later, the lion in winter decided to bring back the lion of summer in the ouster of Cyrus Mistry, who was allegedly becoming a satrap too.

I spoke to Cyrus a couple of years after his ouster when he was still engaged in a fierce legal battle with the Tata group. He said to me, "This has to be done because what was done was completely against all corporate law and principles." I wished him luck. (He didn't eventually get anything even remotely resembling luck.) But I said to myself, "Boy, you don't know what you are up against. Go ask Ajit Kerkar, Dilip Pendse, Russi Modi."

Ratan Tata was a lion all right, winter or not.

(Shankar Sharma is one of India's best regarded investors, Founder of Gquant, an AI company, and a long time investor and watcher of the Tata Group)