Cyrus Mistry may have to give up top posts in other Tata cos

The Mistry family which holds around 16-18 per cent stake in Tata Sons is the largest individual shareholder — and a non-Tata shareholder — in the Tata holding company.

Written by George Mathew | Mumbai | Updated: October 25, 2016 11:58 am
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In the wake of being replaced as group chairman, Cyrus Mistry may have to step down as the chairman of major Tata companies including Tata Motors, Tata Steel, TCS, Indian Hotels, Tata Global Beverages and Tata Power. He was elevated as chairman of Tata companies in view of his position as the chairman of Tata Sons, the holding company of the group, which controls significant stakes in these companies.

WATCH VIDEO: Cyrus Mistry’s Career Timeline

 

Traditionally, the chairman of Tata Sons heads all major group companies. “It is not clear how the Pallonji Mistry group will take the exit of Mistry from Tata Sons. It is a blow for the Mistry family,” said a banking source, who is a long-time observer of the group. The Mistry family which holds around 16-18 per cent stake in Tata Sons is the largest individual shareholder — and a non-Tata shareholder — in the Tata holding company. Tata Trusts and some of the Tata Group companies hold the remaining stake. The Shapoorji Pallonji Group had effectively secured management control over the Tata group after Cyrus Mistry became the chairman of Tata Sons.

READ | Cyrus Mistry: Everything you need to know about the outgoing Tata Sons chairman

Interestingly, Mistry, who was on the Tata Sons board since 2006, was on the selection committee appointed by the Tata Sons board. In 2011, questions were raised by analysts as to how a selection panel in which Cyrus Mistry himself was a member could choose him as the next head of Tata Sons.

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The second issue highlighted by corporate watchers in 2011 was that Cyrus Mistry lacked experience in running large listed companies. He was involved in managing the construction business of the SP Group though Ratan Tata had said: “He (Cyrus) is intelligent and qualified to take on the responsibility being offered and I will be committed to working with him over the next year to give him the exposure, the involvement and the operating experience to equip him to undertake the full responsibility of the group on my retirement”.

WATCH VIDEO: Cyrus Mistry Removed As Chairman of Tata Sons: Here’s What Happened

 

READ | Cyrus Mistry: Here are key business decisions he took for Tata group

The Mistrys’ association with the Tatas started in 1930 when Shapoorji Pallonji Mistry bought 12.5 per cent in Tata Sons from the FE Dinshaw Estate. The Mistrys later acquired more stake from other Tata family members, taking the SP Group’s holding to about 16.5 per cent. Mistry invested over Rs 60 crore in the Tata Sons rights issue in the ‘90s to maintain his stake in the Tata company. The other major shareholders of Tata Sons are the Tata Trusts and some of the Tata Group companies.

READ | ‘Cyrus Mistry replaced in long-term interest of Tata Sons’

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JRD Tata, who became Tata Group chairman in 1938, initially did not like the idea of Mistry acquiring a major stake in Tata Sons. However, they patched up later and maintained a good relationship over the next two decades. This association was cemented when Pallonji Mistry’s daughter Aloo married Noel Tata, the half-brother of Ratan Tata.

READ | Cyrus Mistry’s Tata journey: Suprise entry, abrupt exit

Mistry, who was the second person from outside the Tata family to head the group in the 142 years of its existence, was able to control the group for just four years, one of the shortest tenures for a Tata group head. After the death of Sir Dorab Tata, Nowroji Saklatwala was the head of the group from 1932 to 1938. However, another Tata — JRD Tata — succeeded Saklatwala, bringing the group back under the control of the Tata family once again.

READ | Cyrus Mistry was attempting to shake up the $100 billion Tata company

Mistry was formally appointed as the chairman of Tata Sons with effect from December 28, 2012, following the retirement of Ratan Tata. Mistry joined the board of Shapoorji Pallonji & Co Ltd as director in 1991 and was appointed the managing director, Shapoorji Pallonji Group, in 1994.