What’s behind the fight atop India’s Tata Group

What’s behind the fight atop India’s Tata Group

A power struggle at India’s largest conglomerate, Tata Group, has moved out of the boardroom and further into the courts. An appeals panel ruled Dec. 18 that 51-year-old former chairman Cyrus Mistry was improperly ousted from his position in 2016 and that the actions of his predecessor, Ratan Tata, had been “oppressive.” It ordered Mistry’s reinstatement, which will probably be challenged in India’s Supreme Court. From table salt to luxury Jaguar sedans, the businesses under the sprawling 151-year-old group account for about 5% of India’s gross domestic product.

1. Who ousted Mistry, and why?

The board of Tata Sons, which controls the group’s major companies, removed Mistry in October 2016 and subsequently named Natarajan Chandrasekaran as new chairman. Directors later cited a “trust deficit” as Mistry, who was handpicked for the role by Ratan Tata, failed to address issues they had raised. Mistry’s nearly four-year tenure, they said, was marked by “repeated departures” from the group’s culture and ethos. Mistry was also accused of seeking to wrest away control of the group’s main operating companies.

2. What are Mistry and Ratan Tata saying?

Mistry appealed in court, saying he was unfairly blamed for five unprofitable businesses. He accused Ratan Tata of constant interference that left him a “lame duck” chairman. His legal gripe, though, was about the way the group was run, including operations at Tata Trusts, a group of philanthropic organizations headed by Ratan Tata that own about 66% of equity in Tata Sons. Tata Sons is the holding company for the overall group but is accountable to Tata Trusts. Mistry’s family owns 18.4% in Tata Sons. For his part, Ratan Tata, the almost-82-year-old patriarch, has previously said Tata Group lost confidence in Mistry and that he was focused on growth by bringing in new leadership. Ratan Tata’s representatives said the Dec. 18 order appears to have gone beyond even Mistry’s demands and would be appealed.

3. What did Mistry ask for?

Mistry wasn’t seeking his job back, but the court ordered his reinstatement anyway. After losing a case at the National Company Law Tribunal -- seeking the appointment of an administrator to oversee the company’s affairs -- Mistry appealed and won an order that declares the Tata Group’s actions illegal. This includes Tata Sons’ decision to take the company private in 2018. Mistry said the latest verdict “is a victory for the principles of good governance and minority shareholder rights.”

4. Will this fight keep going?

Most likely. The Tata Group has until mid-January to appeal to India’s Supreme Court. In the meantime, the conglomerate could seek a stay of the verdict, citing potential disruption to business operations if Mistry is reinstated. Chandrasekaran told employees in a letter that the company’s case was strong -- and to stay focused on their work.

5. Is the dispute hurting Tata Group?

It’s hard to tell. Investors worry that share prices at Tata Group companies could fall as the bitter feud plays out. The group “won’t be able to move an inch” on key decisions it is pursuing, said Ajay Bodke, chief executive officer at Prabhudas Lilladher Portfolio Management Services. These include the hunt for a potential partner for Tata’s Jaguar Land Rover unit. The more than 100 companies in the Tata Group had combined revenue of $110 billion in the year through March 2018 and employ more than 700,000 people. Its 28 publicly listed companies include Tata Motors (owner of Jaguar Land Rover), Tata Steel, Tata Power and software and outsourcing giant Tata Consultancy Services.

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