In a shocking turn of events that has shaken the corporate world, principal shareholders of the $103-billion Tata Group — the Shapoorji Pallonji faction and the Tata Trusts — were locked in a fierce boardroom battle after Tata Sons said Monday it had ‘replaced’ its chairman Cyrus P Mistry and named Ratan Naval Tata interim chairman.
The Shapoorji Pallonji Group, which has a stake of 18.5% in Tata Sons, is believed to have challenged Mistry’s removal, terming it “illegal’ even as the Ratan Tata Trust is understood to have already armed itself with legal opinion from former solicitor general Mohan Parasaran.
The unceremonious dismissal of Mistry — attributed to his performance — had the backing of the Tata Trusts, which hold a commanding 66% stake in Tata Sons. He, however, remains a director on the board and a committee comprising Ratan Tata, Venu Srinivasan, Kumar Bhattacharya and Ronen Sen, among others, will appoint a new chairman in four months.
Mistry’s appointment in December 2012, had come as a surprise but there has been little to suggest so far that there were any major disagreements between him and Ratan Tata, chairman of the Tata Trusts.
That the Tata Group has found itself in the midst of an internecine war is unfortunate especially since Mistry, the 48-year-old son of construction baron Shapoorji Pallonji, had shown himself to be far more mature than his years. Despite inheriting an unwieldy and largely unprofitable legacy — including white elephants such as Corus and Tata Teleservices, both of which were leveraged to the hilt — Mistry went about his task quietly and systematically, pruning assets and adding capacity where needed.
His group executive council was filled with young minds and the four years under his watch — a time of downturn both home and abroad — were marked by caution and consolidation. He took much-needed financial impairments — in Tata Steel, Tata Chemicals and Indian Hotels — cleaning up the Augean stables as it were and sold off several loss-making assets acquired under Ratan Tata’s chairmanship.
Where Ratan Tata was focused on the top line — buying global companies at top dollar valuations — Mistry never took his eye off the bottom line. Indeed, even when he retired, Ratan Tata exhorted his successor to aim for $500 billion in revenues by 2021. Mistry, however, appeared never to be swayed by large numbers, preferring instead to focus on building capabilities in sunrise sectors even as he negotiated the sale of Tata Steel Europe or the former Corus bought in 2007 for $13 billion. His inability to resolve the Tata Docomo issue may have gone against him, corporate sector watchers said.
Despite the collapse in commodity prices and the sharp slowdown in the global economy, the combined market capitalisation of the top 10 listed companies in the Tata stable has risen to Rs 8.21 lakh crore from Rs 4.66 lakh crore in December 2012; ex-TCS, this rise would have been more moderate, from Rs 2.19 lakh crore to Rs 3.43 crore. Sales for these top 10 companies grew a compounded 8. 3% in the three years between FY13 and FY16, despite sales at Tata Steel falling in FY16. Profits for the pack grew at a CAGR of 26.5%. Combined debt rose to Rs 2.26 lakh crore from Rs 1.86 lakh crore in March 2013, with the borrowings at Tata Steel alone rising Rs 17,000 crore during this period.
There will always be external influencers and so-called experts, who may be motivated by immediate transactional gains, goading us on to churn our portfolio. It is important that we develop our own prognosis based on knowledge and context, keeping all stakeholders in mind. We should not be afraid of taking tough decisions for the right reasons, with compassion.
There’s one school of thought that says he (Mistry) should have done much more. There’s another school of thought which is saying he has done too much. I really don’t know what is the thinking in the Tata Sons board, but I thought he was on the right track…
Harsh Mariwala, chairman, Marico
What is the board doing? I don’t think it’s done anywhere in the world where you call back a chairman who’s gone, he’s retired and is close to 80 to come back and choose a successor, especially to replace the person that he has chosen…
TV Mohandas Pai, chairman, Manipal Global Education Services and Aarin Capital
Measured Mistry: Chasing profits not assets
- Financial impairments taken in Tata Steel, Tata Chemicals and Indian Hotels
- Urea business of Tata Chemicals sold to Norway-based Yara International’s Indian unit for Rs 2,670 crore
- Taj Boston and Taj Blue Sydney sold, pursuit of Oriental Express abandoned
- Pulled out application for licence to set up commercial bank
- Negotiated sale of Tata Steel Europe to Greybull Capital
- Market cap of top 10 listed firms up at Rs 8.21 lakh cr from Rs 4.66 lakh crore