In about two months, on December 28, Cyrus P. Mistry would have completed four years at the helm of the Tata Group.
It wasn’t to be.
On Monday, in a move unprecedented for the nearly 150-year old business conglomerate, Tata Sons said that its board has decided to replace Mistry as the chairman of Tata Sons. “The decision was taken at a board meeting held here today,” Tata Sons said a statement.
Ratan Tata, the man whose shoes Mistry has tried to fill over the last four years, will be the interim chairman of Tata Sons until a search committee finds a successor. The five-member search committee includes Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Lord Kumar Bhattacharyya.
An Insider Who Didn’t Prove To Be One
Mistry’s appointment in 2011 had been seen as a victory for the single largest shareholder of Tata Sons - The Shapoorji Pallonji group, which holds about 18.38 percent in the company.
Cyrus, the youngest son of Pallonji Mistry, was the first non-Tata to be appointed to the helm of the Tata Group. He was also not the most likely contender as the group had decided to launch an international search to find Ratan Tata’s successor.
According to media reports at the time, the search committee had interviewed at least a dozen candidates. Those said to be in the running included Noel Tata, Indra Nooyi, Arun Sarin and Vindi Banga. Given the profile of the contenders, Mistry, relatively inexperienced at managing large businesses spanning sectors from steel and auto to technology and consumer staples, was not the obvious choice.
Still, since Cyrus Mistry was from the family which was the single largest shareholder, he was seen as an insider. It may not have proved to be that way. A carefully worded statement from Tata Sons suggested that the principal shareholder - Tata Trust - had recommended that Cyrus Mistry step down.
The board in its collective wisdom and on the recommendation of the principal shareholder decided it may be appropriate to consider a change for the long term interest of Tata Sons and Tata Group. The selection committee has been constituted. The committee has been mandated to complete the process in 4 months. There is no change at the levels of CEOs in the operating companies.Tata Trust Spokesperson
Not An Easy Run
Mistry’s run as Chairman of Tata Sons has not been an easy one. Each of the group’s largest firms have faced their own set of troubles, which has meant that performance at the group level has been subdued.
According to the Tata Sons website, revenue of the Tata Group was at Rs 6.77 lakh crore in fiscal year 2016 compared to Rs 6.65 lakh crore the previous year, a growth of just 1.9 percent. In dollar terms, revenue has dropped 5 percent between fiscal 2015 and fiscal 2016.
“The dollar value drop in revenue is largely due to global political uncertainty, a steep reduction in commodity prices, and volatility in currencies,” Cyrus Mistry told the annual gathering of Tata Group leadership in July, according to a press release on the group’s website.
The group’s market capitalisation has gone from $114.35 billion at the end of March 2014 to $125.4 billion as on October 6 2016, according to the website.
Among the biggest challenges faced by Mistry has been Tata Steel Ltd. With global steel demand depressed, the company’s U.K. and European operations have been bleeding. In April, Tata Steel sold its long products division to Greybull Capital for a nominal amount. The deal included Greybull taking over the assets and liability of the division. The task of selling two more loss-making U.K. units remains incomplete.
At Tata Motors Ltd., the challenge has been to revive the domestic passenger car operation which has struggled for years. While Tata Motors has benefited from the Jaguar Land Rover acquisition, the company has failed to capture the domestic passenger car market despite re-positioning the Nano and launching new models like the Tiago earlier this year.
Even Tata Consultancy Services Ltd., the group’s cash cow, has seen some slow-down in growth of late. Earlier this month, TCS warned that sentiment was cautious with clients holding back on discretionary spending.
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