Tata Sons, the holding company of India’s largest business group, said on Monday it had decided to replace Cyrus Mistry as chairman, a shock announcement that stunned many.
Ratan Tata, patriarch of the $103-billion salt-to-software conglomerate, will take over as interim chairman for four months while a company-appointed search panel finds Mistry’s replacement.
Mistry is the son of Pallonji, who controls nearly 18% of the equity in Tata Sons. That makes him the single largest individual shareholder in the group that operates in 150 countries and owns the luxury British brand Jaguar Land Rover.
“The board, in its wisdom and on the recommendation of the principal shareholders, decided that it will be in the long-term interest of the group to replace Cyrus Mistry,” a spokesperson for Tata Trusts told HT over the phone from Mumbai.
Tata Trusts, chaired by the 78-year-old Ratan Tata, are the principal shareholders in Tata Sons. Two of them, Sir Dorabji Tata Trust and Sir Ratan Tata Trust, together hold 51.6%.
A terse statement issued by the Tata Sons board did not give reasons. Mistry, 48, has battled issues on a number of fronts in recent months, including a costly settlement with Japanese telecom operator NTT Docomo and the sale of Tata Steel’s loss-making UK business.
Britain’s referendum vote in June to exit the European Union was a big setback for the steel sale, which the company has now put on hold.
But, in his favour, the combined market capitalisation (the sum of the market value of all equity shares) of the group’s listed companies nearly doubled during Mistry’s tenure. This figure had risen 57 times under Tata’s 21 years, but Ratan Tata had the advantage of starting on a much smaller base.
In a letter to Tata Group employees, Ratan Tata said: “A new management structure is being put in place... In the interim, the board has requested me to perform the role of the chairman and I have agreed to do so in the interest of stability of and reassurance to the Tata Group.”
He also wrote to Prime Minister Narendra Modi about the management changes.
One big management change Tata made right away was to disband the Group Executive Council. Mistry had set up this six-member group early on in his stint to shape strategy across companies. Tata is slated to meet the GEC members and the CEOs of some group companies on Tuesday.
The panel to look for Mistry’s successor has Ratan Tata; Venu Srinivasan, who heads Chennai-based TVS; Amit Chandra, a trustee of several Tata trusts; Ronen Sen, former Indian ambassador to the United States; and Lord Kumar Bhattacharyya, who founded the famed Warwick Manufacturing Group in the United Kingdom.
Tata Sons board has nine directors. At their meeting on Monday, said a senior group executive, six of the directors voted in favour of replacing Mistry and two abstained. Mistry is the ninth director, a position he retains.
He also continues as the chairman of several Tata companies, among them Tata Consultancy Services, Tata Steel, Tata Motors, Indian Hotels, Tata Power, Tata Global Beverages, Tata Chemicals, Tata Industries, and Tata Industries. Group insiders expect him to leave these posts now that he is now longer the chairman of Tata Sons.
However, the Mistry camp appears to be in no mood to take things lying down. The Shapoorji Pallonji Group, ran by Mistry’s father Pallonji, said Mistry’s removal was illegal and it would challenge the decision.
The Delhi legal circle was abuzz on Monday that Ratan Tata had retained top corporate lawyers Harish Salve and Abhishek Manu Singhvi for any litigation that might arise from Mistry’s removal.
Few would have seen Mistry’s removal coming. He had taken charge in December 2012 amid much fanfare, the result of a long search by a panel headed by Ratan Tata, who ran the group for 21 years before making way for Mistry. Mistry was himself a member of the panel that chose him.
At that time, Ratan Tata’s half-brother Noel, PepsiCo chief Indra Nooyi, and former Vodafone CEO Arun Sarin were whispered to have been in contention. Those names are again doing the rounds as replacement for Mistry.
The 148-year-old Tata Group is known to have long-serving chairmen. The shortest stint before Mistry’s was Nowroji Saklatwala’s six years that ended in 1938. JRD Tata served as chairman for 53 years. None lost their job but retired.