MUMBAI, Oct 24: In a sudden and dramatic turn of events, Cyrus Mistry was today sacked as Chairman of India’s largest conglomerate Tata Group and replaced by his predecessor Ratan Tata in the interim, triggering a possible confrontation between the single-largest shareholder and the company’s founding family.
Mistry’s family firm Shapoorji Pallonji Group, which has 18.4 per cent in Tata Sons — the holding company of USD 100- billion salt-to-software conglomerate — is believed to be considering fighting out the “illegal” removal.
In the suprise development, the board of Tata Sons, where 66 per cent shares are held by philanthropic trusts endowed by members of Tata family, ousted Chairman Mistry saying it was acting “for the long-term interest” of the firm.
No reason was given for removing Mistry who was brought in less than four years back with much fanfare, but it is believed there were differences over management style and his approach of selling assets after writing them down.
The board named a five-member search committee, which includes Tata, to choose a successor within four months.
“Tata Sons Board met today and decided to replace him as Chairman with immediate effect. The Tatas Sons board in its collective wisdom and on the recommendation of principal shareholder decided that it may be appropriate to consider a change for the long term interest of Tata Sons and the Tata group,” a Group spokesperson said.
Mistry, 48, who replaced Tata, 78, as chairman in December 2012, was only the sixth group Chairman in nearly 15 decades and the first from outside the Tata family. He will remain a director of the individual companies, though his tenure as Chairman is the shortest so far at the group.
Tata will be interim head of the group while a Selection Committee appointed by the company searches for a replacement.
The spokesperson said the Committee has been constituted with a mandate to complete the process in four months.
Also, there will be no change at the level of CEOs in the operating company, he said.
“Tata Sons today announced its board has replaced Mr Cyrus P Mistry as Chairman of Tata Sons. The decision was taken at a board meeting held here today,” a Tata Sons statement said.
The board constituted a selection committee comprising Tata, TVS Group head Venu Srinivasan, Amit Chandra of Bain Capital, former diplomat Ronen Sen and Lord Kumar Bhattacharya. All of them, except Bhattacharya, are on the board of Tata Sons.
“The committee has been mandated to complete the selection process in four months,” it added.
Under Ratan Tata’s chairmanship spanning over two decades (1991 to 2012), the Group’s revenue grew from around USD 6 billion to USD 100 billion, driven by his expansionist strategy that included overseas purchases like tea maker Tetley in 2000 and luxury car company Jaguar Land Rover (JLR) in 2008.
But out of 100 companies under Tata Sons, only a few were profitable, with Tata Consultancy Services (TCS) and JLR clearly standing out.
Tata Steel, which bought Corus Group Plc in 2007, has been cutting operations in the UK since the 2008 global financial crisis.
Mistry, on the other hand, was looking at tackling mounting debt by raising cash, refinancing loans and selling assets after writing them down.
He was chosen as Tata’s successor in November 2011, and was appointed Deputy Chairman of Tata Sons, whose board he had entered in 2006. He became chairman in December 2012 on the basis of his representation from Shapoorji Palonji, the largest shareholder in Tata Sons.
An engineer from the Imperial College of Science, Technology and Medicine in London, he began working for the group controlled by his father, billionaire Shapoorji Pallonji Mistry, in 1991.
Founded in 1868, Tata Group employs nearly 700,000 people and its 100 business include making salt, steel, leather goods, watches, tea, trucks and buses and luxury cars, developing software, generating electricity, running shopping chains, operating undersea cables and mobile telephony and owning hotels. Recent additions include defence, infrastructure and financial services.
Mistry, who was chosen by a five-member panel in 2011 to succeed Ratan Tata, took over the reins of the conglomerate when the veteran industrialist retired on December 29, 2012 at the age of 75 years.
After taking charge, Mistry had to face some challenging situations such as the decision to sell Tata Steel UK in the wake of mounting losses.
Tata group is also engaged in a legal battle with Japan’s Docomo over the split of their erstwhile telecom joint venture Tata Docomo.
In an interview with an in-house magazine, Mistry had last month stated that the group “should not be afraid of taking tough decisions for the right reasons, with compassion” amid “challenging situations” confronted by some of the group’s businesses that would require hard and bolder decisions on pruning portfolio.
This was in contrast to steps taken by Ratan Tata, who led the group into some notable acquisitions, starting from Tetley by Tata Tea for USD 450 million in 2000, to steelmaker Corus by Tata Steel in 2007 and the landmark Jaguar Land Rover in 2008 for USD 2.3 billion by Tata Motors.
During Tata’s tenure, the group’s revenues grew manifold, totalling USD 100.09 billion (around Rs 475,721 crore) in 2011-12 from a turnover of a mere Rs 10,000 crore in 1991.
Born on July 4, 1968, Mistry completed his graduation in civil engineering from London’s Imperial College of Science, Technology and Medicine and followed it up with a masters in Management from the London Business School. (PTI)
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