Shaking The Foundations

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J.N. Tata's ideals survive today. Tata Sons, the holding company that manages the group, is 65.8% owned by 11 charitable trusts, which spent $379.2 million on social causes in 2003-04 alone. Over the following 12 months, Tata companies donated another $97.8 million. Beneficiaries range from a host of Tata educational, health and scientific institutes that dot India to the Ganges River's giant mahseer fish, saved from extinction by a Tata-funded breeding program.

The group's corporate piety extends to the boss' pay. Though the business house carries his name, Ratan Tata merely draws a salary from Tata Sons. And while hardly poor, he takes personal modesty seriously. Tall, guarded and retaining the outsider's accent he picked up in an earlier life as a trainee architect in the U.S., he is famously private. He lives with his two German shepherds, Tito and Tango, in the same second-floor apartment in Bombay that he has kept for 20 years. He is one floor below his stepmother, and neighbors say they have never known him to throw a party. His one indulgence apart from his dogs he is frequently spotted muddying his pinstripes as he plays with them in a park near his home is a collection of cars. Apparently embarrassed by the extravagance, he excuses his interest as stemming from a love of design, not show. "I drive them periodically," he says, "and then back to the garage."

What really excites Tata is his ability to combine the group's philanthropic heritage with modern business sense. Targeting the bottom of the income pyramid a lot of people with a little, rather than a few with a lot ticks both boxes. It's almost as if he's reciting from last year's hit book, C.K. Prahalad's The Fortune at the Bottom of the Pyramid Eradicating Poverty Through Profits. Tata points out that consumption, as it is understood in the West, is still a dream for all but a fraction of 3 billion people in the developing world. Only 58 million Indians, out of the country's 1.1 billion population, earn more than $4,400 a year, according to Delhi's National Council of Applied Economic Research. The challenge is to make consumers out of people whose disposable income would be pocket money for many American children.

One of Tata's answers is the $2,200 car, a four-door, rear-engine runabout that he designed himself and that is currently under development (he aims to sell a million of them a year in India after its release in 2008). Another is the Ace, a 700cc truck that Tata Motors sells for less than $5,000 and, since its launch in southern India in May 2005, has accounted for two-thirds of all trucks sold domestically. Purchases of these vehicles are supported by low-interest consumer loans from Tata Finance. Following the same model, Tata's hotel chain is building 200 hotels across India under the brand Ginger, offering rooms with wireless Internet access, air conditioning and ensuite bathrooms for 1,000 rupees ($22), a fifth of the cost of a room paid by budget business travelers in India today. Tata is also eyeing low-cost housing.

That same desire to market to, and invest in, some of the world's poorest countries is behind Tata's affinity for Bangladesh and Africa. Tata group recently finalized a $3 billion power, steel and coal deal in Bangladesh, the biggest investment in that country's history. In South Africa, the group has investments in mining, tourism and engine manufacturing. There is an instant-coffee plant in Uganda, a bus factory in Senegal and a phosphate plant in Morocco. "We look at countries where we can play a role in development," says Tata. "Our hope in each is to create an enterprise that looks like a local company, but happens to be owned by a company in India."

Tata says the group's success proves his approach is good business, as well as good karma: "We are not in anything for charity." And lest this all sounds too good to be true, the group is not free from controversy. In 2001, Tata Finance sacked its managing director and five other senior managers over alleged financial irregularities. In January, Tata Steel's plans to build a mill in the eastern state of Orissa went tragically awry when police fired on protesters who were accusing the state government acting as a broker in the development of making profits on the sale of their land. Twelve were killed. But to shed 40,000 employees at Jamshedpur, Tata Steel offered to pay their current salaries until retirement age along with free health care for life, and allowed them to keep their company houses for three years. Initiatives like these have kept the group free of strikes and other industrial actions for 77 years.

After 15 years as chairman, Tata is thinking of retiring. Asked how he would spend his days, he says he gave up golf long ago and has almost no free time outside the business. On rare evenings off, he says he takes a half-hour boat ride across Bombay harbor to a small, scruffy beach house. "It seldom had power, so I had to put in a small generator," he says. "It's quiet and away from everywhere. There is a town and there are neighbors, but I go quietly on my own. I walk the beach and I read and I think about what I should do." It's not how you conventionally picture a tycoon's life. That's his point.

—With reporting by Sandeep Bhaumik/Jamshedpur