Cyrus Mistry, the erstwhile chairman of Tata Sons, has been shown the door and the old guard Ratan Tata is back at helm at Tata Sons, albeit for a short tenure of four months.
But, what led to expulsion of Mistry from the hotseat? Especially, as he was the proverbial blue-eyed inheritor of the Tata mantle.
Although, Mistry's expulsion came as a surprise, the decision to let him go could have been in the books for quite some time, opine experts.
Mistry, who belongs to the Shapoorji Pallonji Mistry family, has impeccable credentials and experience. However, when he took over the reins from Ratan Tata as Chairman, Tata Sons, the board seemed unhappy with some of the decisions he took as they felt they were not aligned with the way Tatas functioned over the past many decades.
In the telecom venture with Japan's DoCoMo, Tatas lost the arbitration case and were particularly blamed for being adamant in their stance for not resolving the dispute, the Economic Times reported.
"For a nuanced Tata watcher, this was a big change. In the past, Tatas would have told a battery of lawyers that there's a commitment and they must find a way around the problem," ET reported quoting an anonymous person.
The issue with DoCoMo has been one of the simmering points between Ratan Tata and Cyrus Mistry, Moneycontrol reported.
"With the agreement signed between the Japanese telecom company and Tata Sons, Ratan Tata was leading the group and had assured DoCoMo that whenever they exit while incurring a loss, they will get half of the money they had invested in Tata Teleservices," Moneycontrol report said.
Cyrus also did not take shareholders into confidence when the former chairman gave his nod for Tata Power's $1.4 billion acquisition of Welspun's solar farms.
“Tata Power is a cash guzzler but generates very little profit. Yet, when it’s embarking on its biggest buyout, a principal shareholder is kept in the dark. That’s unprecedented in Bombay House (Tata Group headquarters),” said an old-time group insider," the ET report said quoting an old-time group insider.
Also, a harassment case involving a senior functionary at a group company left Tata old-timers in a bad taste. The Tata Trust, too, weren't happy with the functioning of the Group Executive Council set up by Mistry. These GEC members closely worked with the CEOs and senior management of the group companies, the ET report said.
Mistry's decision to sell off some of the loss-making steel assets in UK, which Ratan Tata had bid hard for its acquisition almost a decade back, did not go down well within the group.
Although, many of the listed Tata group stocks did exceedingly well on the bourses in nearly four years time since Mistry was given the charge in December 2012, financial performance of the group, however, shows a different picture.
In fact, Tata Sons' overall sales fell to $103 billion in the last fiscal (2015-16) from $108 billion in 2014-15, indicating the ultimate blame may fall at the doorstep of Mistry. The group's net debt also jumped to $24.5 billion as of March 2016, up from $23.4 billion in the year-ago period.
Published Date: Oct 25, 2016 16:09 PM | Updated Date: Oct 25, 2016 16:43 PM