Disbanding Of Team Cyrus Could Slow Tata Groups Debt Reduction Process, Say Analysts

Tata Sons' shock move to oust Cyrus Mistry and his core team of advisors and bring back Ratan Tata as chairman of the salt-to-software conglomerate could lead to delays in the group's bid to reduce its debt load across its businesses, analysts say. 

The stunning boardroom coup, announced late on Monday, sent shares in some of Tata's major listed entities lower on Tuesday, despite the company's attempt to calm the waters by bringing a well-known and widely respected hand like Ratan Tata back to the helm. 

Soon after Tata Sons sacked Mr Mistry at a meeting of its board on Monday, it also disbanded the group executive council (GEC), a team of core advisers that Mr Mistry had set up in 2013 to provide strategic and operational support to him. 

It included N S Rajan from Ernst & Young, Tata brand custodian Mukund Rajan, ex-Bombay Stock Exchange chief Madhu Kannan, strategist Nirmalya Kumar and Tata veteran Harish Bhat. 

Mukund Rajan and Harish Bhat will be offered new roles within the group, sources in the know of the development said. It was unclear what the group plans for the other three members. 

"Under Mr Mistry, the Tata Group have taken significant steps towards deleveraging and better utilisation of capital over the last few years," Citigroup said in a note circulated to internal clients on Tuesday. 

"His absence going forward may impact the future strategy and thereby may delay the process of deleveraging and RoCE (return on capital employed) improvement at the group levels." 

Bank of America Merrill Lynch analyst Sanjay Mookim said in a note to clients that the decision could indicate that the board is looking for a change in group strategy. 

The 48-year-old had been trying to shake up the $100 billion company by changing its management structure to bring in new faces at senior levels. 

"A new management structure is being put in place and a selection committee has been constituted to identify the next chairman," Ratan Tata said in a letter to Prime Minister Narendra Modi, informing him of the changes. 

The Tata group has over a 100 operating companies spread across six continents. In 2015-16, the revenue of Tata companies, taken together, was $103 billion and they employed over 6,60,000 people.