Turmoil erupts in Tata as India’s biggest group removes chairman

PUBLISHED : Tuesday, 25 October, 2016, 2:01am
UPDATED : Tuesday, 25 October, 2016, 2:01am

Tata Group abruptly ousted its chairman of almost four years in a rare display of discord atop India’s biggest conglomerate, casting the spectre of a leadership vacuum at the US$100 billion coffee-to-steel business empire.

Chairman Cyrus Mistry, 48, was replaced by his 78-year-old predecessor at a board meeting on Monday, the group’s holding company said in a statement. Ratan Tata, a scion of the founding family, will serve as the interim chief and take part in the search for a more permanent successor, according to the statement from Tata Sons Ltd.

The move signals the end of Mistry’s push to transform Tata Group into a more prudent enterprise than the globetrotter that bought Jaguar Land Rover and steelmaker Corus Group Plc under Ratan Tata. In recent years, the Indian conglomerate refinanced loans and sold assets to help tackle debt levels that had bloated to more than $30 billion.

“This is just too bizarre that the chairman of the biggest industrial group in the country has been removed in such an arbitrary manner,” Gaurang Shah, vice president at Geojit BNP Paribas Financial Services Ltd. in Mumbai, said by phone. “The Tata Group owes an explanation as to why such a sudden decision has been taken. There will be some knee-jerk reaction on the stock prices of Tata Group companies.”

A spokeswoman for Tata Sons declined to comment beyond the company’s two-paragraph statement. Ratan Tata didn’t respond to an e-mail seeking comment. Attempts to reach Mistry weren’t successful.

Tata Motors Ltd. rose in New York trading, while Tata Steel Ltd. fell in London. The announcement came after the close of trading in India, where most of Tata’s units are listed.

The group, founded in 1868, is an Indian giant that employs more than 660,000 people and has 29 listed units with a combined capitalization of more than $100 billion. Tata Consultancy Services Ltd. is the group’s biggest unit and India’s largest company by market value.

Back at the closely held holding company, Tata Sons created a panel comprising of Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Kumar Bhattacharyya to find a new chairman within four months, according to the statement.

Tata Sons also plans to disband Mistry’s Group Executive Council, according to people with knowledge of the matter.

The board made the leadership change after getting a recommendation to do so Tata Sons’ principal shareholder, which is Tata Trusts, said a trust spokesman who asked not to be identified. Mistry will continue to be a director at individual group units, he said.

“This is just too shocking,“ said G. Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory Pvt.

“The Tata Group is going through a lot of problems and most of it was either inherited, such as Tata Steel or Tata Motors, or due to adverse economic conditions like the IT business. It is very difficult to attribute it to leadership. Therefore it is shocking.”