'Elxsi was on the brink of collapse, Ratan Tata was worried': Ex-CEO recalls survival, and why India lost manufacturing

In the early 1990s, Tata Elxsi was on the verge of collapse when S Devarajan took the helm. The company faced severe financial difficulties, struggling with debts and low morale. Within the Tata Group, there were discussions about shutting down Elxsi or merging it with TCS. Ratan Tata, who considered Elxsi a personal project, was deeply concerned as losses continued to escalate. In his recently published book, "Designed To Win: The Tata Elxsi Story," Devarajan, who served as Managing Director and CEO from 1996 to 2001, details the company's remarkable turnaround during his leadership. In an exclusive interview, he reflects on the pivotal moments that led to Elxsi's transformation into a global leader in engineering and design services. Devarajan recounts his initial appointment to the company, acknowledging the dire circumstances that awaited him. He recalls the gravity of the situation when Ratan Tata expressed his worries about the company's future. Tata's involvement was significant; he provided crucial funding and closely monitored the company's performance, pushing for a change in strategy. The turnaround came after a revised business strategy was implemented, alongside raising additional equity through a rights issue. With renewed customer confidence and a dedicated team, Elxsi began to flourish. Despite the company's resurgence, Devarajan raises concerns about India's manufacturing landscape. He notes that while Tata Elxsi was one of the early tech startups founded in Silicon Valley, India failed to build a robust semiconductor ecosystem. The liberalization of the economy in the early 1990s led to a decline in local manufacturing as imports flooded the market, which stunted the growth of domestic electronics and hardware industries. Devarajan emphasizes that although India excels in software services, it lags behind in hardware. He points out that many IT companies focus their research and development efforts on global markets rather than domestic innovation, which limits opportunities for growth within India. Looking ahead, Devarajan advocates for a renewed focus on domestic demand and the development of homegrown technology. He is actively involved in initiatives aimed at revitalizing the semiconductor industry, stressing that the future of India’s tech landscape hinges on self-reliance and innovation. As India aims to scale its semiconductor production, Devarajan underscores the importance of learning from past mistakes and ensuring that the next steps are taken wisely to foster a sustainable growth environment.