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Why India’s most respected firm said ‘Tata’ to Cyrus Mistry

MG ArunOctober 24, 2016 | 19:05 IST

The terse statement from Tata Sons on Monday, October 24, announcing that Tata Group chairman Cyrus P Mistry has been "replaced", raises more questions than it answers.

First, there has been no explanation given as to why Mistry, who is just four years at the helm, has been shown the door. Was it non-performance, or something else that the Tata board has decided to be tight-lipped about?

Why was it so abrupt, that Ratan Tata, the iconic former chairman, who is busy mentoring start-ups and delivering motivational speeches in academic institutions, had to be brought in from retirement with immediate effect?

What conspired at the Tata board meeting that led to the ouster of the powerful Mistry, whose father and construction magnate Pallonji Mistry owns a majority share (over 18 per cent) in Tata Sons?

Was he sacked at all, or was it his own decision to move out? But in that case, why so suddenly?

To be sure, Mistry’s relatively short innings at the Tata Group was not as remarkable as one would have expected from a Tata successor (Ratan Tata was chairman for over two decades). Blame it partly on the global slowdown and the tough business conditions at home, the group has seen several of its businesses struggling.

With Rs 4.78 lakh crore in market capitalisation, the flagship company, Tata Consultancy Services (TCS), overshadows all the other group companies by a huge margin. It would be inconceivable to think of the group sans TCS.

The group’s steel business has been struggling after the expensive buyout of UK company Corus, nearly a decade ago, failed to make any strong contribution to its bottomline.

Was Mistry sacked at all, or was it his own decision to move out?

Rather, the Europe business was a millstone on its neck and was eventually put on the block by Mistry earlier this year (That workers wanted to keep the firm open, forcing the UK government to send emissaries to Mistry for an alternative solution, is another matter).

Tata Motors came in with mixed results, with the pick-up in commercial vehicles doing it good, and new markets for Jaguar and Land Rover, including that in China giving the company some respite from sagging sales of its home-bred passenger cars.

The chemicals business continues to be impacted by the vagaries of global headwinds, while retail business under Croma and Trent, though somewhat established, have been facing tough competition from online start-up companies.    

But the worst tidings for the group had come in the form of sour relationships with its former partner in the telecom business - Japan’s NTT DoCoMo. The Japanese firm has sought the transfer of assets worth $1.17 billion from Tata Group, in a bid to reach an out-of-court settlement in an ongoing legal tussle.

The amount is equivalent to what the London-based arbitration court had asked Tata Sons to pay NTT DoCoMo. The legal tangle is also a grim reminder that Cyrus Mistry has not been able to make any inroads into the telecom business, where other corporate such as the Aditya Birla Group and Reliance Industries had capitalised on in a major way.

Mistry’s exit is as dramatic as his entry. He was just the second non-Tata (after Nowroji Saklatwala who was chairman between 1934-38) to head the 143-year-old Tata Group.

The reticent Mistry was selected as chairman by a distinguished panel of experts from among 14 candidates that included Tata's half brother Noel, former Vodafone CEO Arun Sarin, PepsiCo CEO Indra Nooyi, then Citigroup CEO Vikram Pandit, and former Google executive Nikesh Arora, among others.

Emerging from the shadows, he had quite large shoes to fill. In hindsight, it’s become evident that four years was all what Mistry was destined to have at the helm. But his exit is clouded in mystery that does not bode well for one of India’s most respected business conglomerates.

Also read: Train to Jamshedpur: The story of Tata, India's global giant

Last updated: October 26, 2016 | 12:15
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