Bit­ter bat­tle roils In­dia’s big­gest con­glom­er­ate

Ousted chair­man launches le­gal ac­tion against the firm

Kuwait Times - - BUSINESS -

The ac­ri­mo­nious bat­tle for con­trol of In­dia’s sto­ried Tata Group is set to get even dirt­ier as its ousted chair­man launches le­gal ac­tion against the firm, mark­ing the lat­est twist in a months-long saga sul­ly­ing the 150-year-old con­glom­er­ate. Cyrus Mistry-the first non-fam­ily mem­ber to helm the $103 bil­lion steel-to-salt group-was sacked in Oc­to­ber af­ter fall­ing out with com­pany pa­tri­arch Ratan Tata.

He has re­fused to go qui­etly, mak­ing a se­ries of al­le­ga­tions of mis­man­age­ment at the helm of the 150-year-old com­pany, be­fore fil­ing a case in court yes­ter­day. And that is where the mat­ter be­comes in­ter­est­ing: the Mistry fam­ily have been in­vested in Tata Sons for 50 years and Cyrus’s fa­ther is the largest non-in­sti­tu­tional share­holder with an 18.5 per­cent stake. “My fight will ac­tu­ally con­tinue, and not only con­tinue, it will strengthen,” he told Bloomberg af­ter fil­ing the suit.

Tata Sons says it will con­test the pe­ti­tion, which al­leges its ac­tions dam­aged mi­nor­ity share­hold­ers’ in­ter­ests. The feud be­tween Mistry and Tata, the 78-year-old for­mer chair­man who has taken in­terim charge, has al­ready wiped nearly $9 bil­lion from the col­lec­tive stock market value of the group’s eight main com­pa­nies.

Ex­perts say it is now dam­ag­ing one of In­dia’s most re­spected brands, whose im­age is built on the Tata fam­ily’s rep­u­ta­tion for pro­bity in a coun­try plagued by cor­po­rate cor­rup­tion. “None of the Tata com­pa­nies are great per­form­ers,” said one Mumbai ex­ec­u­tive who has worked with the group, de­scrib­ing the prob­lems raised by Mistry as a “wake up call” for in­vestors. “(Now), the market won’t give them as much lee­way for be­ing the Tata group as they had in the past,” he told AFP, speak­ing on con­di­tion of anonymity.

Ratan, who is cred­ited with build­ing the con­glom­er­ate into a global be­he­moth, says his suc­ces­sor was be­tray­ing its legacy. Un­der him, the or­gan­i­sa­tion went on a global pur­chas­ing spree, ac­quir­ing ma­jor names from Tet­ley Tea to Jaguar Land Rover and the An­glo-Dutch steel firm Corus in 2007 — a ma­jor source of pride for a com­pany founded un­der Bri­tish colo­nial rule.

But parts of the busi­ness have been strug­gling, and the 50-year-old Mistry had tried to re­duce its $30 bil­lion debts by sell­ing un­der­per­form­ing as­sets.

That is said to have irked Ratan. But Kavil Ra­machan­dran, pro­fes­sor at the In­dian School of Busi­ness, be­lieves he should have given Mistry freer rein. “When a per­son is re­tir­ing, he has to move out com­pletely,” he said. “It’s like a re­lay race. The per­son hand­ing over the ba­ton has to know when and how to do it.”

Drawn-out fight

Both Mistry and Tata are from wealthy Parsi fam­i­lies-fol­low­ers of Zoroas­tri­an­ism, one of the world’s old­est re­li­gions. But ex­ec­u­tives who know both men say the sim­i­lar­ity ends there. “There’s a stark dif­fer­ence in style and judge­ment and val­ues be­tween the two men,” said the Mumbai ex­ec­u­tive, who worked with both at the com­pany. Mistry has pulled no punches since his sack­ing, al­leg­ing in a let­ter to the board that al­most ev­ery as­pect of the busi­ness was ham­pered by debt and poor man­age­ment. The Euro­pean steel busi­ness, he said, faced po­ten­tial write-downs of more than $10 bil­lion, only some of which had so far been taken into ac­count. Mistry had planned to sell off Tata Steel’s loss-mak­ing Bri­tish op­er­a­tions, but that de­ci­sion has since been re­versed.

He also ques­tioned the wis­dom of con­tin­u­ing with the Nano, a cheap, no-frills car that was a pet project of Ratan but failed to sell. “Emo­tional rea­sons alone have kept us away from this cru­cial de­ci­sion,” Mistry wrote in the let­ter, which the com­pany says con­tained “un­sub­stan­ti­ated claims and ma­li­cious al­le­ga­tions”. Mistry was set to be re­moved from the boards of com­pa­nies in­clud­ing Tata Steel and Tata Mo­tors at ex­tra­or­di­nary gen­eral meet­ings this week. But he pre-empted that Mon­day by re­sign­ing, al­though he re­mains on the board of Tata Sons, which is not pub­licly listed.

Ma­hesh Singhi, head of in­vest­ment bank­ing firm Singhi Ad­vi­sors, said the saga had “dented the im­age of In­dia’s largest con­glom­er­ate in ways that we have not wit­nessed in cor­po­rate his­tory in the coun­try in the re­cent past”. “This is def­i­nitely neg­a­tive for the Tata Group,” he said. “In­vestors will be re­quired to brace for a long-drawn fight.” —


AIZAWL: An In­dian Mizo pedes­trian walks past a Chris­tian na­tiv­ity crib in Aizawl, cap­i­tal of north­east­ern Mi­zo­ram state, on De­cem­ber 21, 2016. Chris­tians, through­out the world, will be cel­e­brat­ing Christ­mas Day on De­cem­ber 25. —


MUMBAI: This file pho­to­graph taken on April 24, 2012, shows Tata Sons chair­man, Ratan Tata (L) and deputy chair­man of Tata Sons, Cyrus Mistry as they pose dur­ing a func­tion to launch the new Croma e-re­tail store. —

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