How Did Tata Family Save Tata Steel From Bankruptcy - #Issue: 13 🗞️
It was probably the finest display of corporate responsibility and leadership during the darkest hours of their business.
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How was your Diwali? We hope had a great time with your friends and families. We too took an off and spent some quality time with our near and dear ones!
It is that time of the week when you want to sit down, grab a cup of chai or coffee and read about the finest display of corporate responsibility in India’s history.
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Vijay Mallya left India when his ambitious airline project Kingfisher Airlines found itself neck-deep in debt. He continued to live a life of luxury in the United Kingdom.
Diamond baron Nirav Modi and his uncle Mehul Choksi duped Punjab National Bank and flew away from India. Nirav Modi was eventually tracked down to the United Kingdom, and his uncle Mehul Choksi bought himself a Caribbean passport.
Then there was Jet Airways founder Naresh Goyal caught by Indian authorities at the eleventh hour. Goyal has purposely fully flown Jet Airways to the ground.
India and the world have seen a fair share of ambitious businessmen running away from their responsibilities when things turned south. They ran away duping banks and thousands of workers who gave their blood and sweat. A few rotten apples like these have created a bad name for everyone from the entrepreneurial community.
Then there is Tata Family. Like every businessman and entrepreneur, the Tata Family has seen hard times in their various business ventures. But what sets them apart from the rest is how they faced every challenge and put forward the finest display of business acumen and entrepreneurial spirit.
The dream:
Jamsetji Nusserwanji Tata (also known as J N Tata), the founding patriarch Tata Business Empire always wanted to build world-class businesses in India. He wanted to show the world India is not far behind when it comes to producing products and services of global standard. He had a dream. A dream of building a world-class steel plant, a five-star hotel, a power plant and a research institute that cater to the brightest minds of India.
Unfortunately, J N Tata left this mortal world in 1904 before all of his dreams became reality. After his death, his son Sir Dorabji Tata took over the charge of things at Tata Business Empire. And his first order of business was making his late father dream a reality.
Tata Iron and Steel Company:
In 1907, one of Jamsetji's dreams came to life. India's first steel plant Tata Iron and Steel Company (TISCO) was established in Jamshedpur, India. It took another five years to import machinery, train the workforce, secure raw material supplies. Finally, in 1912, the massive furnaces in TISCO started melting iron ores, and heavy machines started rolling out iron bars and steel. It was a landmark moment for the Tata Family and India. For a nation under colonial rule for more than a century, TISCO was a testament to India's willpower, the sign of India's entrepreneurial spirit. TISCO was the shot in the arm for the nascent Indian business scene. Tata Steel secured the contract to supply iron and steel to major European economies and Asian tiger, Japan.
The decade of growth and expansions:
With TISCO running in full swing, Tata Group chairman Sir Dorabji diverted his focus on other projects his father late Jamsetji had in his mind. Among these were a power plant, a cement plant and one of the first banks owned and operated by the Indians.
Tata Group started a cement plant in Gujarat. A hydel power plant, one of the first in India constructed on the Kaveri river. Tata Industrial Bank, one of the first Indian banks to be owned and operated by Indians was also established. Tata Group was the biggest business house in India at that time.
The first world war:
The year 1914 saw the Europeans get into a war. The first world war was fought between the Allied and the Axis Forces. The United Kingdom, as part of the Allied Forces, was fighting against the Ottoman Empire, Austria Hungary and Germany.
The first world war saw the massive demand for construction materials and metals. Iron and steel were hot commodities. Irons and steel were used in building military equipment, bridges and defensive structures during the war.
TISCO (modern-day Tata Steel) responded to the call of the British Government to supply iron and steel. TISCO started manufacturing defence and military-grade iron and steel for the British government.
In this process, TISCO stopped the production of commercial steel. Commercial steel products give a handsome margin and generate a higher return for the company.
Tata’s decision to stop commercial production cost the company around 1 crore rupees in profit in 1916. The value of 1 crores rupees would be at least a few thousand crores today.
Begining of gloomy days:
The first world war ended in 1918. With the end of the war, the demand for military-grade steel dropped in Europe. Many countries in Europe started their steel plants. This further decreased the demand and export of TISCO. Another big customer of TISCO, Japan was struck by a massive earthquake.
The export and revenue of TISCO dropped by many folds with its decrease in profits. At the same time, many of Tata’s businesses were also facing monetary issues.
The situation at TISCO went from bad to worse. By 1922, TISCO had no money to pay for the salaries of its employees. TISCO was looking at an existential crisis.
Over my dead body:
During one of the board meetings of TISCO in 1922, one of the directors suggested, Tatas should consider selling the TISCO company. Sir Ratanji Dadabhoy Tata responded, “Over my dead body.”
The sign was clear. Tata Family will not sell TISCO. Anyone who wants to do something has to do it over the dead bodies of Tata family members.
The finest display of business leadership:
Sir Dorabji Tata and Sir Ratanji Tata got into action to save TISCO. Sir Dorabji put his own money of 1 crore as security to raise loans. Sir Dorabji’s wife mortgaged her jewellery to raise money from the State Bank of India (then Imperial Bank of India). Sir Ratanji Tata reached out to Indian independence movement leaders to gather support. TISCO soon went into a cost-cutting drive.
By the end of the 1920s, TISCO was back in the game. The hard decision taken by the family was showing results.
While most of the businessmen ran away from the country when their businesses went south, Tatas decided to face challenges heads on. Members of the Tata Family put on their finest display of leadership and saved one of Jamsetji’s dreams from being lost in oblivion.
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Coming up on the next issue:
His astrologer predicted a vast fortune for him. But, even after stealing his wife’s jewellery, his fortune did not want to change.
Recap:
If you have missed the last issue of Stories Indica, read it here:
Tata Family is India's pride. They deserve the highest honour of the country.
Tata means trust