In the corridors of Bombay House, the 92-year-old headquarters of the $103-billion Tata Group, Pallonji Shapoorji Mistry is known as the “Phantom”.
Hardly visible, yet enormously influential, the 87-year-old, with a love for whiskey and horses, remains the group’s single biggest individual shareholder. He is also worth a staggering $14.1 billion, equalling the entire market capitalization of Tata Motors, India’s largest automaker.
At the Tata Group, the reclusive billionaire’s clout became apparent only in 2011 when his younger son Cyrus Mistry was appointed chairman. It was the first time in 74 years that someone from outside the Tata family had taken the corner office. It was also an opportunity for the Mistry family to exercise management control at the salt-to-steel maker ever since Pallonji Shapoorji Mistry’s father—Cyrus’s grandfather—acquired shares in Tata Sons (pdf) in 1936. Tata Sons is the holding company of the Tata Group.
However, five years after Cyrus’s ascent, kingmaker Pallonji Mistry is suddenly on unfamiliar turf.
On Oct. 24, in a surprise announcement, the Tata Goup decided to sack Cyrus as chairman. It is the first time in the group’s 148-year history that a chairman has been dismissed. While the Tatas haven’t disclosed the reasons for the sacking, media reports have pointed to performance issues and investor concerns.
Since then, numerous reports have suggested that a long-drawn legal battle may be in the offing between the Mistrys and the Tata Group. “(The) Tatas have filed caveats seeking notice from Cyrus Mistry, fearing legal action. Cyrus has not filed any caveats. He has already made a statement that such concerns are misplaced at this stage,” Mistry’s office told NDTV.
However, for the octogenarian Pallonji, whose family owned no stake in the group at the time of his birth, the sacking is a watershed moment in his eight-decade relationship with the Tatas.
The long, twisted Tata bond
In 1925, a businessman named Framroze Edulji Dinshaw lent Rs2 crore to the Tata Group to rescue the flailing Tata Hydro and Tata Steel. In return, Dinshaw was promised 25% of the money that Tata Sons made from Tata Steel and 12.5% of that from Tata Hydro. However, Dinshaw’s deal over Tata Steel and Tata Hydro did not materialise; instead his loan was converted into equity worth some 12.5% in Tata Sons.
In 1930, a year after Pallonji was born, his father Shapoorji acquired this 12.5% stake from Dinshaw’s heirs.
Meanwhile, in 1926, JRD Tata, who became Tata Group chairman in 1938, divided his father’s stake in Tata Sons between his sisters and brothers. Some of these siblings of JRD eventually sold their stakes to Shapoorji in 1936.
So, together, these purchases meant that Shapoorji held an 18% stake in Tata Sons by 1936. The remaining was with the various trusts set up by the founding families.
Not much is known of exactly how Shapoorji managed to buy these stakes since the Tatas were always apprehensive about bringing outsiders into the business. JRD even saw Shapoorji’s entry as an “intrusion.”
By 1975, Shapoorji had passed away, leaving the 18% stake in Tata Sons to his son. Pallonji managed to smoothen the course by ensuring better ties between the two families and with the Tata Group chairmen, first JRD and later Ratan Tata. ”Pallonji established a much better relationship with JRD. They got to being cordial,” a Tata insider told Forbes in 2011. “Pallon never interfered, never challenged, and never sought any power.”
The marriage of his daughter, Aloo, Cyrus’s sister, to Ratan’s half-brother Noel, cemented the ties.
So who is Pallonji Mistry?
Shapoorji’s father (Cyrus’s great-grandfather), also called Pallonji, started out as a small-time builder and set up Littlewoods Pallonji & Company in 1865 in partnership with an Englishman. Among its initial projects were Mumbai’s (then Bombay) first reservoir near Malabar Hill and the footpath along Girgaum Chowpatty. It then ventured to build automobile factories and steel mills for the Tata Group.
After his father passed away in 1921, Shapoorji (Cyrus’s grandfather) set up Shapoorji Pallonji Construction, which went on to build iconic buildings such as those of the Reserve Bank of India, The Taj Mahal Palace and Towers, the Oberoi Hotel, and many residential properties in Mumbai. In 1929, he had a son, Pallonji.
Shapoorji, who hadn’t completed his matriculation, ensured that his son Pallonji (Cyrus’s father) received a good education. Pallonji went to the prestigious Imperial College London and went on to marry Patsy Perin Dubash, an Irish citizen. He himself became an Irish citizen himself by 2003. Cyrus, too, is an Irish national. After Shapoorji died in 1975, Pallonji took control of the Shapoorji Pallonji group.
Today, the group, of which Pallonji is chairman emeritus, owns a diverse range of companies, including construction firms Afcons, SPCL, SP International, Sterling & Wilson, SP Real estate and consumer goods maker Eureka Forbes, with a combined annual turnover of over $4 billion. In 1971, the company built the palace of the Sultan of Oman.
Pallonji put his own succession plan in place at the Shapoorji Pallonji Group in 2012, after Cyrus was made Tata Group chairman. That meant Cyrus’s elder brother Shapoor was in charge of the family company.
Now, with Cyrus shown the door, it looks like the phantom of Bombay House has a tough few weeks up ahead, both with the Tatas and on his own turf.