Ratan Tata takes over as interim chief of Tata Sons; Cyrus Mistry removed

Mumbai: Mystery surrounds Monday’s abrupt announcement on dislodging Cyrus Mistry as the Tata Group’s chairman after a decision to this effect by the Tata Sons board. In a terse four-line statement, the company said, “Tata Sons today announced that its board has replaced Mr Cyrus P. Mistry as chairman of Tata Sons. The decision was taken at a meeting held today.”

His predecessor Ratan Tata replaced him as interim chairman for four months, and the board also named a five-member search committee, that includes Mr Tata, to choose a successor as chairman.

Late on Monday, Mr Ratan Tata wrote to Prime Minister Narendra Modi informing him of the change in top management in the Tata Group.

The selection committee includes, besides Mr Tata, TVS Group chief Venu Srinivasan, Amit Chandra of Bain Capital, former ambassador to the US Ronen Sen and Lord Kumar Bhattacharya. All of them, except Bhattacharya, are on the board of Tata Sons.

It was only in September this year that Mistry had said, “We are building the Tata Group of the next 150 years. The Tata Group’s international revenues are close to 70 per cent of its composite turnover.”

The unexpected removal of Cyrus Mistry as the chairman of Tata Sons has shocked the industry and investors alike as none of them had any inclination about a possible change of guard at India’s largest business group that has a history of long- serving chairmen. What has disturbed market participants the most was the manner in which the replacement was announced.

“It’s not like any other company. It’s a big group. If the issue were about non-performance, he should have been allowed to continue during the interim period till they find an appropriate replacement. However, the way he was replaced raises a lot of questions,” said a fund manager who did not wanted to be named.

One section of market participants believe that the dispute between Tata Group and the Japanese Telecom firm Docomo along with the crisis in Tata Steel’s UK operation have blemished the reputation of the group, which is known to follow the highest standard of corporate governance and ethics.

“Mr Mistry has been vocally raising issues about certain businesses and was very much in favour of consolidation, which I believe didn’t go well within the group that is known for keeping their legacy businesses alive.

“The market knows that the group is going through a challenging phase and also expected some painful restructuring in coming days. However, the removal of Mr Mistry was unexpected,” said Deven Choksey, managing director, K.R.Choksey Securities.

According to him, the shares of Tata Group companies are likely to see selling pressure in coming days unless the group provides more clarity on the issue. “I am sure the regulator (Sebi) would also seek more information on the matter,” Mr Choksey added.

However, U.R.  Bhat, founder of Dalton Capital that advises foreign portfolio investors (FPI) believes that the move is neither positive nor a big negative from the markets perspective.

“The market didn’t react much when Mr Mistry was appointed as the chairman of Tata Sons four years back. So his exit also shouldn’t worry the markets. However, his removal was unexpected and to that extent it is negative,” Mr Bhat added.