Almost four years after he took charge as the Chairman of Tata Sons, Cyrus Mistry was asked to step down from his post on Monday. Mistry, who was tasked to find a successor to Ratan Tata to head the over USD 100 billion Tata Group, had himself become a surprise selection saw his tenure cut short abruptly. 78-year-old Ratan Tata is now the interim chairman till a successor is selected in the next four months. The reasons for Mistry’s ouster by the Tata Sons board is not clear yet. However, according to sources, the decision was taken on the suggestion of Tata Trusts.
WATCH VIDEO: Cyrus Mistry’s Career Timeline
In a statement on Monday, Tata Sons 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.” Mistry was only the second non-Tata to take charge of one of country’s oldest business empires after Nowroji Saklatvala in 1932.
Meanwhile, sources told the Indian Express that board-room and management issues could be among the reasons. Confirming to the Indian Express former Solicitor General Mohan Parasaran said that the group had sought legal opinion a month ago on “issues relating to management”. “He was replaced due to management issues,” Parasaran had said. After his removal as the chairman, many believed Mistry may challenge Tata Sons’ decision to replace him with Ratan Tata.
Ever since Mistry took over the reins of the salt-to-software conglomerate, he had to face numerous challenges in the global and domestic markets. His style of working was also in sharp contrast to his predecessor. He undertook a strategy of divesting assets. Notable among them is the group’s steel business, especially Tata Steel Europe. The company had also announced plans to sell its UK operations after years of losses, although the company is yet to finalise the sale. Besides, the Tata group is also entangled in a legal battle with Japan’s NTT Docomo over the split of their telecom joint venture Tata Docomo. Aside from this, Taj group of hotels has also been reporting lacklustre performance. More importantly, Tata Motors would have gone down had Jaguar Land Rover, which was acquired during Ratan Tata’s tenure, not bailed out the company.
Quite contrary to these developments, Ratan Tata led the group into some noteworthy 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 deal in 2008 for USD 2.3 billion by Tata Motors.
The Tata family members still hold 66 per cent of equity capital in Tata Sons through philanthropic trusts. The largest among these trusts are the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust. Headed by Cyrus’s father and construction baron Pallonji Mistry, the Mistry family holds about 18 per cent stake in Tata Sons. They are the largest individual shareholder — and non-Tata shareholder — in the Tata holding company.
Industry experts widely believe that Cyrus’s ouster would not come without consequences. However, Shapoorji Pallonji on Tuesday said it is studying the circumstances and hasn’t yet decided on taking legal action. Shapoorji said it will make a statement on the course of action when such a thing becomes necessary.
In an emailed statement, the construction group noted: “Neither the SP Group nor Mr Cyrus Mistry have made any statement yet. While the circumstances are being studied, there is no basis to media speculation about litigation at this stage. As and when a public statement becomes necessary, it would be made.”
In the meantime, Ratan Tata spoke to journalists on Tuesday in Mumbai where he clarified the reasons behind Cyrus’s sacking. “Assumed role of interim chairman for stability and continuity so that there is no vacuum. The company’s board and the principal shareholders in its collective wisdom took this decision, which they thought may be appropriate in the long term interest of Tata Sons and the Tata Group.”
As of Tuesday, Tata group filed caveats in Supreme Court, Bombay High Court and National Company Law Tribunal to prevent ousted Tata Sons Chairman Cyrus Mistry from getting an ex-parte order against his sacking. There was some confusion earlier over alleged reports that Mistry had in fact filed caveat, which was denied by his office eventually.