Independent directors of Indian Hotels Company Ltd — which runs the Taj group of hotels have backed Cyrus Mistry, expressing their “full confidence in the chairman and praising the steps taken by him in providing strategic direction and leadership to the company, in what is perceived to be a setback to the group led by Ratan Tata which removed Mistry as chairman of the group.
The independent directors of Indian Hotels — including HDFC chairman Deepak Parekh, former HUL chairman Keki Dadiseth, Godrej group’s Nadir Godrej and Ireena Vittal — met before the board meeting and decided to back Cyrus Mistry, making it tough for the Tatas to dislodge Mistry from the company. “After deliberations, the independent directors came to a view that being a listed company, it was imperative for the independent directors to state their views to the investors and public at large, such that those who trade in securities of the company make an informed decision,” Indian Hotels said.
“Taking into account board assessments and performance evaluations carried out over the years, the independent directors unanimously expressed their full confidence in the chairman, Cyrus Mistry, and praised the steps taken by him in providing strategic direction and leadership to the company,” Indian Hotels said.
Interestingly, Cyrus Mistry, after he was sacked as Tata Sons chairman, had questioned the operations of Indian Hotels. Mistry had sent a letter to Tata Sons directors, levelling allegations, among other things, that “Indian Hotels, beyond flawed international strategy, had acquired the Searock property at highly inflated prices and housed in an off balance sheet structure. In the process of unravelling this legacy, Indian Hotels has had to write down nearly entire its entire networth over the past three years. This impairs its ability to pay dividends.” Surprisingly, the independent directors have supported Mistry.
According to corporate watchers, with the backing of independent directors, it will be tough to remove Mistry as chairman of Indian Hotels. Shapoor Mistry, brother of Cyrus Mistry, is also on the board. Significantly, Tata Sons doesn’t have a strong director as its nominee on the Indian Hotels board.
“It will be tough for Tata Sons to remove Mistry through a board resolution. Mistry has enough support in the board,” said an institutional source. The Tatas have only 38.65 per cent stake in Indian Hotels. Meanwhile, Indian Hotels Company reported a net loss of Rs 26.76 crore for the second quarter ended September 2016 against the year-ago period.
Cyrus Mistry is expected to chair the board meeting of Tata Chemicals on November 10. This will be another crucial meeting for both the Tatas and Mistry. Apart from Mistry who is the chairman, the Tata Chemicals board includes Nusli Wadia, who is considered a close confidant of Ratan Tata, Nasser Munjee and R Mukundan. On October 25, after his removal as Tata Sons chairman, Mistry had chaired a board meeting of Tata Global Beverages held at Bombay House. This board meeting discussed about the various plans of the firm and Mistry’s resignation never figured in the meeting.
In fact, Mistry is the chairman of top Tata group firms, including Tata Steel, TCS and Tata Motors. It remains to be seen how the independent directors will handle the situation in these three firms. With the victory at Indian Hotels meeting, Mistry is expected to dig his heels in various group companies.
Corporate observers were surprised with the decision of independent directors to support Mistry. In a letter to employees last week, Tata had said, “the decision to change the leadership of Tata Sons was a well-considered and serious one for its board members. This difficult decision, made after careful and thoughtful deliberation, is one the board believes was absolutely necessary for the future success of the Tata group.” But Indian Hotels board clearly thinks otherwise.
When contacted, a Tata spokesperson said he’s “not aware of any meeting between principal shareholder (Ratan Tata) and Independent Directors” or “an extra-ordinary general meeting (EGM) meeting” of Indian Hotels being convened in the next 48 hours.