IN THE latest twist to the ongoing tussle for supremacy within the Tata Group, holding company Tata Sons on Thursday sacked Cyrus P Mistry as chairman of Tata Consultancy Services (TCS), the most valued Indian listed company. Hours later, the independent directors of another group company, Tata Chemicals, reposed their confidence in Mistry.
These developments came on a day when U K Sinha, chairman of Securities and Exchange Board of India (SEBI), the securities market regulator, said that independent directors of listed firms should protect the interest of shareholders and fulfill their fiduciary duties.
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Mistry has been replaced as TCS chairman by Ishaat Hussain, a long-time Tata group loyalist and one of the two directors who abstained from voting when the proposal to remove Mistry as the chairman of Tata Sons was considered by its board on October 24. All the other six directors had voted for the removal of Mistry.
Meanwhile, the expression of confidence in Mistry by the independent directors of Tata Chemicals came six days after a similar move by the independent directors of Indian Hotels Company Limited (IHCL).
That the Tata group is determined to remove Mistry from all group companies is clear from the fact that Tata Sons has also issued a special notice and a requisition for convening an extraordinary general meeting (EGM) of TCS to consider a resolution for the removal of Mistry as director of the company.
Separately, Tata Sons has requested a shareholder meeting of IHCL to pass a resolution for the removal of Mistry as director. The move comes just a couple of days after Mistry secured the support of IHCL’s independent directors to retain the post of its chairman during a board meeting of the company.
Sources said that Tata Sons is likely to adopt a similar strategy in some of its other group companies over the next few weeks.
Mistry was removed as TCS chairman under the Articles of Association, which state that as long as Tata Sons and its associates hold at least 26 per cent of the paid-up equity capital of the software major, they will have the right to nominate the chairman of its board of directors. Tata Sons and its associates currently hold over 73 per cent stake in TCS.
In the absence of a nomination by Tata Sons, the directors may elect from among themselves a chairman and determine the period during which he will hold such office.
In the case of IHCL, the Tatas hold an equity stake of close to 38.65 per cent and are expected to obtain the requisite majority as other institutions are likely to support the promoter group.
TCS, the most profitable company in the Tata group, has a market capitalisation of Rs 425,228 crore and is considered the cash cow of the $103 billion group.
“The company has received a letter dated November 9 from Tata Sons nominating Ishaat Hussain as the Chairman of the Board of Directors of the company in place of Cyrus P Mistry with immediate effect. In view of this, Mistry has ceased to be the Chairman of the Board of the company and Hussain is the new Chairman. The company has been further informed that Hussain shall hold office as Chairman until a new Chairman is appointed in his place,” TCS said in a stock exchange notice.
Mistry will continue as director on the TCS board until his term ends or till the time he is removed through an extraordinary general meeting (EGM).
Mistry is the chairman of two major group companies — Tata Steel and Tata Motors — where the Tatas don’t have a majority.
Hussain, the new TCS chairman, took over as finance director of Tata Sons in July, 2000, after joining the Tata Sons board as executive director in July, 1999. He is also a director of several Tata companies, including Tata Industries, Tata Steel and Voltas, and chairman of Voltas and Tata Sky.
Hussain is a chartered accountant of the Institute of Chartered Accountants in England and Wales (FCA), and a member of SEBI committees on insider trading and primary capital markets. He is also a member of the Confederation of Indian Industries finance committee.
Prior to joining Tata Sons, Hussain was senior vice president and executive director of finance at Tata Steel for almost 10 years. He joined the board of Indian Tube Company, a Tata Steel associate company, in 1981 and moved to Tata Steel in 1983, after Indian Tube was merged with Tata Steel.