Cyrus Mistry's exit from Tata Sons: News explained in 10 points

The board of Tata Sons on Monday replaced chairman Cyrus Mistry and brought back Ratan Tata as interim chairman for four months. In a letter to employees of the group, Ratan Tata said the board had requested him to perform the role of chairman and he had agreed to do so “in the interest of stability of and reassurance to the Tata group”.

Ratan Tata had been Tata Sons chairman from 1991 until his retirement on December 28, 2012. Cyrus Mistry had succeeded Tata to be the sixth chairman of the Tata group. While Mistry will remain an independent director on the board of Tata Sons – a position he held before he became chairman – he will quit as chairman of all group companies.

Business Standard explains Mistry’s sudden exit as Tata Sons chief and how the story unfolded through 10 reports:

MONDAY:

Cyrus Mistry removed, Ratan Tata returns

A brief statement from Tata Sons did not give any reason for Mistry’s ouster, though sources close to the development said it was because of “performance” issues; the move had impending for some time. The turnover of India’s largest conglomerate had dropped to $103 billion in 2015-2016 from $108 billion the previous year. Net debt had risen to $24.5 billion (about Rs 1.63 lakh crore) in March 2016 from $23.4 billion a year earlier.

The turn of events

It had taken less than half an hour at a full-strength board meeting on Monday afternoon in Mumbai to replace Cyrus Mistry as the chairman. The meeting had been attended by all 11 board members, including Nitin Nohria, the dean of Harvard Business School, and top-ranked investment strategist Farida Khambata – based in the US, both of them usually attend meetings through video-conferencing. This was no ordinary meeting, where even Ratan Tata was present as chairman emeritus. The 78-year-old Tata left the meeting as interim chairman of Tata Sons.

Mistry’s focus during his stint

Cyrus Mistry’s tenure at Bombay House was more about consolidation than firing on all cylinders. He inherited a global business empire that grew rapidly under his predecessor, Ratan Tata, through a series of outbound mergers and acquisitions. The growth was largely funded through debt and underwritten by cash flows from Tata Consultancy Services.

Experts thought Mistry was a succession experiment gone wrong

Going back to an insider with little experience probably backfired for the Tata group. Four years after he took over as the chief of Tata Sons, the holding company of the Tata group, Cyrus Mistry had to bid goodbye to the chairman’s office. Proxy advisory firms viewed this as a case of “failed experiment” in succession.

ALSO READ: Cyrus Mistry's exit: A succession experiment that failed, say experts

TUESDAY:

‘Business as usual’ at Tata Sons

A day after the Tata group asked Cyrus Mistry to go, interim chairman Ratan Tata walked back to the corner office on the chairman’s floor at Bombay House, headquarters of the group, to address the group’s top chief executive officers (CEOs). “It’s business as usual,” he told the CEOs.

The agenda for Ratan Tata

‘What next’ was the biggest question at Bombay House and outside on Tuesday. While it was too early to draw up a road map, sources said finding an able successor, consolidation of group businesses, taking a call on the slow telecom business and settling some thorny issues were possibly the topmost on Ratan Tata’s agenda after taking charge as interim chairman of the group.

End of a vision?

The Vision 2025, launched by Cyrus Mistry to make the Tata group one of the top 25 corporate giants globally in terms of market value by 2025, was scrapped, according to a top source in the group. The Tata group’s Vision 2025 had first been announced by Mistry at the annual CEO meet in 2014.

An exit in a hurry?

It sounded like an echo when Ratan Tata told his CEOs on Tuesday that the companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past. Last month, Roland Junck, executive chairman of British Steel, had suggested that the Scunthorpe steelworks — sold by Tata Steel in May for one pound — had become “inward-looking” and “stopped comparing themselves with the best” under its previous management.

For Tata trusts, was it a lack of trust in Mistry?

Two trusts controlled by Ratan Tata had withdrawn significant investments in Tata Sons prematurely in May, suggesting differences might have begun months before Monday’s move to replace Cyrus Mistry as chairman. The Jamsetji Tata Trust and Navajbhai Ratan Tata Trust had redeemed their entire holding of preference shares, worth Rs 3,951 crore, about 10 years before their tenure ended.

Slow equity support to Tata group firms

Cyrus Mistry ran Tata Sons with a tight fist — at least, that’s what data suggest. Under Mistry’s tenure, Tata Sons slowed down its direct equity support to various group operating companies, and several group companies in need of funds had to raise resources from the market at high costs or by way of sale of assets.


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