From Parsee priests to profits: say hello to Tata

Like his devout Zoroastrian ancestors, Ratan Tata avoids conspicuous consumption. Yet he has guided his company through India's economic boom to revenues of more than £10bn a year and his takeover of Corus will make it the fifth largest steel manufacturer in the world. Justin Huggler reports

The chances are most Britons have never heard of the Tata Group, the Indian company which yesterday won its bid to take over Britain's Corus steelmaker. But though you may not have heard of it, you've almost certainly drunk Tata tea. Few in Britain might realise it, but Tata has owned Tetley tea since 2000.

You have probably been on a Tata bus or seen a Tata lorry as well: in 2004, the Tata Group bought out the commercial vehicles division of Daewoo. And it is possible even that you may have stayed in a Tata hotel without realising it: it manages several famous hotels around the world, including the Pierre in New York.

Tata is the quiet man of Indian big business. While rivals such as Lakshmi Mittal or Kingfisher Beer's Vijay Mallya flaunt their wealth and acquisitions, the family-run Tata Group prefers to stay out of the gossip columns. Yet, without attracting much attention in the West, Tata has been quietly buying up an impressive portfolio of companies around the world, transforming a family firm into a multinational group.

Where there is an existing brand, it doesn't rename it, it just keeps running it as if nothing had happened. Consumers would never know their favourite brands have been bought up by an Indian company.

Yet in India Tata is a household name. The likes of Mr Mittal and Mr Mallya are very recent arrivals compared to the Tatas, who were millionaire businessmen when Queen Victoria was Empress of India.

The company's founder, Jamsetji Tata, was descended from a family of Zoroastrian priests, refugees from persecution in Iran. He gave India its first steel mill, its first shipping line and its first textile factory.

He founded his own city which still bears his name today and which is still dominated by Tata Steel: Jamshedpur. He also founded the most famous hotel in India, the Taj Mahal in Bombay, now Mumbai.

Among his successors were JRD Tata, who was India's first pilot and founded its first airline, piloting the maiden flight himself. His Tata Airlines was nationalised and still exists today as Air India. The Tatas also gave India its first bank and its first motor company.

Yet when Ratan Tata took over as chairman in 1991, the grand old firm of Indian industry was in serious decline. Its fortunes had fallen with the nationalisation and "license Raj" that followed Indian independence. It was Mr Tata who guided the family firm through the years of economic liberalisation that have enabled India's economic emergence - to the point where it has revenues of more than £10bn a year. Tata is the company that stands on its head all the Western assumptions about Indian big business. Where most people in Britain think big Indian companies are a new phenomenon, Tata has been around since the 1860s. And where the stereotypical image of the Indian tycoon is Mr Mittal, who spent more than £30m on his daughter's wedding, and more than £57m on his house, Mr Tata is the model of understatement. His only luxury is his private car collection.

But when Tata Steel had to shed 32,000 workers to remain competitive over the past decade, it offered a voluntary redundancy package that can rarely have been equalled anywhere in the corporate world. It promised to continue to pay workers who took redundancy a frozen salary for the rest of their lives, until retirement age - even if they found another job.

The story of Tata begins with Jamsetji Tata, born into a family of Parsee priests in Gujarat in 1839. The Parsees are one of India's most distinct communities. Descended from refugees who fled persecution in Iran, they have retained their Zoroastrian religion and culture. To avoid polluting earth, fire or water, they still dispose of their dead by leaving them on Towers of Silence to be devoured by vultures - though India's fast-dwindling vulture population has them looking for an alternative method.

Jamsetji was born in British-ruled India. His father was the first male member of his family for generations not to join the priesthood, instead setting up his own private company in Bombay, which Jamsetji joined in 1858, hardly an auspicious year. The Indian Mutiny against British rule - or Uprising as it is known in India - had just been put down with brutal force the previous year.

But Jamsetji was to spend the following years building his own business empire. He initially made his fortune on the back of the opium trade to China, a detail that is airbrushed out of the company history today, although the opium trade was legal at the time. He set up his own cotton mills to export to China. It opened on the same day Victoria was crowned Empress of India.

But it is the story of how Jamsetji, an Indian nationalist, came to own the finest hotel in India that is most revealing of his character. At the time, the best hotels in Bombay were run by the British - and did not accept Indian guests. Legend has it that Jamsetji decided to build a hotel when, already a seriously wealthy man, he was refused entry to a local hotel where whites far less rich were lording it over him because of the colour of his skin. Jamsetji decided he would own the best hotel in India - and it would be open to Indians.

The hotel he built, the Taj Mahal, dwarfed the British hotels in grandeur and elegance. It is still standing today, long after the hotels that denied its founder entrance have gone - and it is still considered the finest hotel in India. When Gordon Brown visited Mumbai last month, it was the Taj Mahal he chose for dinner. But it was Jamsetji's vision of becoming a steel manufacturer, though, that really made the Tata family fortune. He heard the Scottish historian and sociological writer Thomas Carlyle predicting that the country which controlled steel would control gold, and decided to become an Indian steel magnate. After finding iron ore in modern-day Jharkhand state, he laid plans for a steel plant and a city for his workers. He never succeeded in his lifetime but the plans came to fruition after his death, in the form of Jamshedpur, the steel city that is named after him.

Yesterday's takeover of Corus, which will make Tata Steel the world's fifth largest steel manufacturer, is a step further in Jamsetji's vision of Indian dominance through steel.

Jamsetji also stipulated workers' rights that were then unheard of in the West: an eight-hour working day, properly ventilates workplace, and a provident fund. It was a model which has worked well for Tata Steel: it hyasn't had an industrial dispute for 75 years.

British Corus workers, nervous at yesterday's news their employer had been taken over by an Indian company, need look no further than Jamshedpur. All the steel workers there enjoy subsidised housing. They receive free treatment at the local hospital, built and funded by Tata, and their children can go to Tata-run schools. Electricity is subsidised. Water is free - and Jamshedpur is one of very few cities in India where the tap water is drinkable, because it has been purified by Tata. The company even runs a snake hotline in case a snake gets inside workers' houses.

Jamsetji's other great dream was a science college, which came to fruition after his death as the Indian Institute of Sciences in Bangalore, one of the country's foremost centres of learning. His philanthropic principles still inform the Tata Group today: it is 66 per cent owned by charitable trusts, which spent $379m (£193m) on social causes in 2003-4. Tata even claims to have saved a rare breed of Ganges fish, the mahseer, from extinction with a breeding programme it funded.

But if its founder was a nationalist, the Tata Group went through dark days in the years after Indian independence. Tata Airlines was nationalised and taken away from the company, as was its insurance business, as India plunged into years of socialism that turned it into an economic basket-case.

Ratan Tata took over the chairman's role at a moment of great opportunity, as India finally liberalised its economy, but he decided the company needed to be modernised. He cut work forces and set performance targets. He may have made the company less patriarchal - although the redundancy packages were hardly brutal - but he made it competitive as well.

When Mr Tata bought Tetley Tea for $435m in 2000, it was the biggest deal in Indian history. That's a record he has easily demolished with yesterday's £5.75bn takeover deal for Corus.

The group he has set about building is still heavily influenced by the industries that captivated Jamsetji. As well as steel, Tata runs the Taj group of hotels, as well as managing some famous hotels such as the Pierre under their original names. But Mr Tata has also pursued his own interests, in particular his dream of building a car that would be affordable to millions of Indians who cannot buy new cars at today's prices: the 100,000 rupee-car (£1,150), which he has designed himself.

For all its much-vaunted charitable work and worker relations, Tata has not been free of controversy. Last year, 12 people were killed when police opened fire on a tribal group protesting against plans for a Tata Steel plant on their land in the eastern state of Orissa. The indigenous tribal people said the state government was selling off their land and keeping the profits for itself.

And a similar dispute erupted this year in West Bengal, where Tata is trying to build a car factory at Singur. Local villagers are objecting to the government's compulsory purchase of their land. They have won the support of local political parties and activists from all over India, and protests have turned violent with police firing tear gas and baton-charging protestors.

The company's future seems secure, but the same cannot necessarily be said of the Tata family. In a twist that curiously mirrors the fate of the Parsee people, Mr Tata, who has never married, has no direct heir.

The Parsees are dying out. They may be one of the richest and most powerful communities in India, but the Parsees may have little time left. Forbidden by their priests from marrying outside the community, their numbers are dwindling fast. The children of Parsees who marry outsiders are not recognised as Parsees, and it is predicted the community could soon be extinct.

There are other Tata family members who could take over from Mr Tata, who has hinted he may step down soon. But he has also said his successor need not necessarily bear the Tata family name. Either way, Jamsetji's vision appears to be coming to fruition, even if it was delayed by post-independence socialism. India is emerging as a global power, and steel is at the heart of its emergence.