Thanks to Cyrus Mistry and Ratan Tata, it may be a quarrelsome Christmas at Tata Sons

In control.
In control.
Image: EPA/Divyakant Solanki
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The churn at Tata Sons is far from ending.

Even as Cyrus Mistry, ousted as chairman of group holding company Tata Sons, vehemently fights a battle to retain his chairmanship of various group companies, speculation is rife over his replacement. The conglomerate had promised to find a new chairman within four months of Mistry’s sacking.

On Nov. 29, The Economic Times newspaper reported that Noel Tata, Ratan Tata’s half-brother and Cyrus Mistry’s brother-in-law, was among the contenders. The group is also reportedly considering corporate veterans such as former Hindustan Unilever non-executive chairman Harish Manwani, Tata Consultancy Services (TCS) CEO N Chandrasekaran, and Jaguar Land Rover CEO Ralf Speth.

“The list is a small one and Noel is certainly in it. He is someone who is fully aware of the Tata ethos and value systems that have come under strain in recent times,” an official at the group told The Economic Times. ”He is also family.”

On Oct. 24, Tata Sons dismissed Mistry as group chairman. Among other reasons, the company board highlighted his inability to generate adequate profits, even as debt mounted, and his “devious” plan to wrest control of the group from Tata Sons.

“In hindsight, the trust reposed by Tata Sons in Mr Mistry by appointing him as chairman four years ago has been betrayed by his desire to seek to control (of the) main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives,” the Tata Group said in a statement last month.

Mistry has, however, refused to step down as chairman of various group companies where he’s found support among independent directors. Tata Sons, expectedly, isn’t pleased.

Boardroom machinations

His battle, with the staunch backing of Nusli Wadia, a director on the boards of various Tata Group companies and chairman of the Mumbai-based Wadia group, has damaged brand Tata further.

The Tata Group wants to remove Wadia too from the board of various group companies, including Tata Steel, Tata Chemicals, and Tata Motors, for “galvanising independent directors” and for acting in concert with Mistry.

Wadia has now sought evidence from the group against the allegations. ”I have equally stated my shock and surprise that Mr Ratan Tata, in one of his first acts as interim chairman of board of Tata Sons, sought to move a resolution seeking my removal as an independent director of Tata Steel based on deliberate and malicious allegations to tarnish my image and harm my reputation,” Wadia said in a letter to the Tata Sons board on Dec. 01. Wadia is not only a childhood friend of Ratan Tata’s but also the godson of JRD Tata who chaired the Tata group between 1938 and 1991.

Mistry is currently chairman at publicly-listed companies such as Tata Motors, Tata Power, Tata Chemicals, and the Indian Hotels Company (IHCL). However, three group companies, Tata Steel, TCS, and Tata Global Beverages, have replaced him.

On Nov. 09, TCS, India’s largest IT outsourcing company, too, ousted Mistry. Among the group’s cash cows, TCS has now called an extraordinary general body meeting (EGM) on Dec. 13 to consider the removal. Tata Sons holds a 73.26% in TCS.

A week later, on Nov. 15, Mistry was removed as chairman of Tata Global Beverages, which operates Starbucks in India. “After extensive deliberations and keeping in view the long-term interest and alignment of all stakeholders and stability of the company, the board of directors resolved to replace Cyrus P Mistry as chairman of the company, by majority vote, with seven out of the 10 directors present at the board meeting voting in favour of the resolution,” the company said in a statement to BSE.

Finally, last week, on Nov. 25, the 109-year-old Tata Steel also voted to replace Mistry. Its new chairman is OP Bhatt, former chief of the country’s largest lender, the State Bank of India.

Tata Steel’s operations had been a point of contention between Mistry and Tata Sons, especially its 2009 acquisition of UK-based Corus Steel. The Tatas bought Corus for $12 billion, paying as much as half of it through debt. “It is common knowledge that the decision to acquire Corus for $12 billion, when only a year earlier it was available at less than half that price, was based on one man’s ego and against the reservations of some board members and senior executives,” a statement released by Mistry’s office said on Nov. 23, hinting at Ratan Tata.

Meanwhile, Mistry continues to report to office as chairman at other group companies. On Nov. 30, Tata Power, of which Cyrus Mistry is the chairman, held a board meeting to discuss its quarterly earnings. “The board meeting was conducted very professionally and company matters were discussed at length. Mistry is a thorough gentleman and there was no friction during the meeting,” a board member told the Economic Times newspaper.

Coming up

The battle, however, is about to intensify.

Four companies, of which Mistry remains chairman, have called EGMs where his removal is to be considered.

Tata Motors, India’s largest automaker and the group’s biggest revenue generatorwill hold its EGM on Dec. 22. Tata Sons own a 33% in Tata Motors. IHCL which operates the Taj group of hotels, will hold an EGM on Dec. 20, while Tata Steel’s is scheduled for Dec. 21. The Tata Chemicals EGM is on Dec. 23.

Many independent directors on various group companies—those on the IHCL board were among the first—have come out in Mistry’s support, which seems to have forced Tata Sons to resort to these EGMs.

“In the light of developments since Nov. 04 (the day the IHCL directors backed Mistry), Tata Sons reiterates that it is crucially important for boards, including independent directors, to consider that their views and positions ensure that the future of Tata companies is protected taking into consideration the interests of all stakeholders,” a statement from the Tata group said on Nov. 14.

December may never have been as fractious as this year at Bombay House.

Follow our continuing coverage of the Tata Sons boardroom battle here.