1. In Tata Group battle, here’s why Ratan Tata will beat Cyrus Mistry

In Tata Group battle, here’s why Ratan Tata will beat Cyrus Mistry

Ousted Tata Sons chairman Cyrus Mistry, who is fighting to retain his position as chairman and director on the boards of a host of Tata group companies, has found some support from independent directors.

By: | Published: November 16, 2016 6:25 AM
Most of the acquisitions made by the Tata group, under Ratan Tata’s watch, have turned out to be duds but the independent directors have stayed silent. (Reuters) Most of the acquisitions made by the Tata group, under Ratan Tata’s watch, have turned out to be duds but the independent directors have stayed silent. (Reuters)

Ousted Tata Sons chairman Cyrus Mistry, who is fighting to retain his position as chairman and director on the boards of a host of Tata group companies, has found some support from independent directors. A team of six independent directors on the IHCL board, for instance, backed Mistry, applauding his efforts to turn around what was virtually turning into a sick company. Again, independent directors at Tata Chemicals too made it clear they were on his side, though the directors on the Tata Steel and Tata Motors board were a divided lot. However, even if Mistry is backed by independent directors, the fact is that when it comes to the crunch, financial institutions—whether insurers or mutual funds—are more likely to vote with the promoters. That’s because companies such as Tata Steel are heavily leveraged and require large infusions of capital. That capital would have to come from the holding company Tata Sons, controlled by Tata Trusts, which own a stake of 66%. Under the circumstances, the financial institutions, whose primary objective would be to secure their investments, would tend to go with the promoters rather than with a competent CEO—even if he is a small shareholder in the holding company. Had the concerned company been in good financial shape—like TCS, for instance—it’s quite possible the financial investors may have followed the independent directors in backing Mistry. However, given the relatively poor finances of the Tata group as a whole and its dependence on one cash cow—TCS—even the government would be justified in wanting a promoter with the wherewithal to pump in capital into beleaguered businesses. At the end of the day, therefore, while independent directors can make a difference to the running of a company by red-flagging any malpractices or fraud, in very few instances can they really influence shareholders—majority and minority.

Fortunately for Ratan Tata, none of the independent directors ever talked about Tata Steel’s folly in buying a large steel company like Corus at top-dollar valuations and at the peak of the commodity cycle. Neither did they criticise the purchases of the several hotels by IHCL, again at excessive values, most of which have not made money for the company. Most of the acquisitions made by the Tata group, under Ratan Tata’s watch, have turned out to be duds but the independent directors have stayed silent. In fact, the directors of Tata Sons have quietly watched tens of thousands of crores of rupees being spent on Tata Teleservices with nothing to show for it. Therefore, it is truly surprising that Tata Sons should think it necessary to even point out to the independent directors that it is “crucially important” for them to “consider that their views and positions ensure that the future stake of Tata companies is protected”. These are, after all, top professionals, most of whom were appointed during Tata’s watch. It is indeed unfortunate a promoter of the stature of Tata Sons does not value the views of independent directors.

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    Raghavan
    Nov 16, 2016 at 6:48 am
    Tata brought in Cyrus but appears did not meet his expectations. Tata runs companies with human face unlike Cyrus who sold businesss due to down cycle
    Reply
    1. Celix Pereira
      Nov 18, 2016 at 5:31 am
      Cyrus has age on his side. Ratan has lost it. Cyrus mistry will one day run and own and manage the tata group companies. Ratan tata has led the group so badly that it do highly leveraged. Would be surprised if the group survives as it is. Its thr beginning of the end.
      Reply
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        Rameswar Pattanayak
        Nov 16, 2016 at 5:43 am
        He has already lost it.
        Reply
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          Rameswar Pattanayak
          Nov 16, 2016 at 5:43 am
          Ratan Tata may beat Cyrus but at the end it is he who will lose his face.
          Reply
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            Nisha K.Potty
            Nov 16, 2016 at 12:35 pm
            To say that Tata sons have not given due weightage to independent directors opinion is wrong. When came to protecting Mr Cyrus they choose to stand against Tata sons unanimously and voice for cyrus as adamantly as cyrus.Moreover when it came to taking credit for global expansion , the very people including Mr cyrus were part of it over the years but when a strong action against cyrus to oust then the IDs stood against the Parent promoter who was appreciated for the risks, decisions taken over a long span and depicted as respected. If the directors were genuinely concernef about the welfare of shareholders particularly minority and they were truly committed to compan's performance , why these people didn't show tbe courage which they had shown now.The esteemed stalwarts of India Inc. like Nusli wadiaji who happens to be childhood friend of mr Ratan Tata could have choosen to walkout from the board and get the govt., public , shareholders attention then when as per them wrong decisions were taken by Tata , if not at the first acquisition but 2nd or 3rd. Has it been that there was a conscious attempt by few directors and their lobby to get the water flowing like that so that later it could be used to drown Ratan ....and this seems the case as when a newcomer who is young and of a age that can be of His child has been used at the pretext of tata group's welfare against ratan by trying to revoking the actions taken then as wrong and with no solution but to sell the acquisitions terming as non profitable enies IT IS HIGHLY UNFORTUNATE THAT WE DON'T SEE THAT IN BUSINESS Mgmt MANY THINGS HAPPEN BEYOND the svope of tangible analysis and we side track the foundation to a long term success of the group which is humanly tackling the business acquisitions with due respect to those who had the guts to take risk for the group which would definitely not without the role of IDs too. In every goverance surgical strikes don' t occur daily, midnight announcement of banning 500/ 1000 rs notes don't occur daily but the learned as well as the ordinary people who ultimately wish the general welfare support the Decision of a senior authority . Similarly i feel Cyrus also at the first instance could have put his point of views to his Mentor / parent like Senior authority Ratan Tata who paved the way to him much earlier and garner the support of all elders like Nusli sir/ peers and even could have stepped down on request made to him . Instead all choose to blow the whistle against the parent promoter himself .Even at this stage if empathetically thought, every experienced and learned person can understand how the situation has been blown out of proportion .After all whatever acquisitions is for Tata group and not for Ratan. About expenses for jet and all, i don' think sir has to go walking abroad or in 2nd cl AC train just bcoz he has stepped down for Cyrus.It is unfortunate that cyrus choose to be so adament with such a veteran in this manner.Not a matter of Policy ,Righteousness nor Goverance. What is our Indians atude and conscience in taking actions ...what is the validity & value of Padma Bhushan?. This is like business dealing where consistency in thought and decision is lacking with a great dip in human values & digging the grave to check whether the man was dead when it shows INCOMPETENCE not of Ratan but of a system as a w...our beloved India which is boiling with such news.Are we really the Indians who say Rama as most virtuous man bcoz he choose to go to jungle just as his father king ordered. Couldn't he have killed the King for such action. But i believe his modesty gave many many returns to his Kingdom people more than he himself got. Yes one thing u have appropriately pointed is 'value of viewpoint' . But this had to be at the right time with the right force and with right values.Nisha K.Potty
            Reply
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              shiva
              Dec 7, 2016 at 4:07 am
              cyrus wants to raise bar and throw out maximum employees from the group. he started connecting shapporji with Tata group. he had his own personal interest by telling all officers raise the bar increase profits or will be thrown out from the firm. he started sell ests of Tata group. He declared Tata not a NGO but a business making insute. the bar raised forceful got him stuck
              Reply
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