Family patriarch Ratan Tata sought to reassure rattled investors of stability at India’s biggest conglomerate on Tuesday (25) after the sudden sacking of chairman Cyrus Mistry sent Tata company shares falling.
Seventy-eight-year old Tata has taken interim charge of the sprawling $100 billion tea-to-steel Tata Group, after Mistry was abruptly dumped on Monday evening, four years after being appointed chairman.
The sacking stunned the Indian business world and sparked a fall in shares at Tata Sons firms on Tuesday as Indian media carried reports that Mistry could take legal action.
Tata, who had stepped down as chairman after two decades and was replaced by Mistry in 2012, held some two hours of talks with CEOs of TATA’s numerous companies at the group’s headquarters in Mumbai on Tuesday.
According to a company statement after the meeting, Tata told them he had assumed the chairmanship “for stability and continuity so that there is no vacuum”.
Tata told them to focus on their respective businesses and not be distracted by the leadership change.
“This will be for a short time. A new permanent leadership will be in place,” the statement quoted Tata as saying.
Tata Sons is the holding company of India’s most famous family conglomerate which has at least 100 companies in its portfolio spanning as many countries.
Its businesses include one of India’s largest IT firms, Tata Consultancy Services, the biggest vehicle maker Tata Motors, and a ritzy hotel chain which includes Mumbai’s Taj Mahal palace hotel. The company’s brands also feature daily in the lives of Indians, with products ranging from salt to watches.
Tata is credited with building it into a global behemoth during his time at the helm.
Under his leadership, the organisation went on a global purchasing spree, acquiring major names ranging from Tetley Tea to Jaguar Land Rover and the Anglo-Dutch steel firm Corus in 2007 for $13.7 billion.
However parts of the group’s business have been struggling of late, with Tata Steel finding it difficult to offload its loss-making British assets and Tata Consultancy Services being squeezed by the sluggish global economy as clients rein in spending.
Mistry was declared heir to Tata in November 2011, a year before he took over the top position. He became only the sixth chairman in the almost 150-year history of the Indian giant which was founded by Parsi industrialist Jamsetji Tata in 1868.
The abruptness of Mistry’s sacking was uncharacteristic for the company, with analysts claiming Tata had finally lost patience with the 48-year-old’s failure to resolve a long-running $1.17 billion arbitration dispute with NTT Docomo and his focus on divesting non-profitable businesses.
“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,” G Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory Pvt, told Bloomberg News.
“It is very difficult to attribute it to leadership. Therefore it is shocking.”
Tata Steel sank 2.50 per cent in afternoon trade on Tuesday, IT giant Tata Consultancy Services was down 1.19 per cent, with car manufacturing giant Tata Motors also in the red.
Profits at India’s IT outsourcing companies are being squeezed as the sluggish global economy sees clients rein in their spending.
Tata group’s revenue slipped 4.6 per cent for the financial year ended March to about $103 billion, hurt by global economic uncertainty, a crash in commodity prices and volatility in currencies, according to Bloomberg.
It has been trying to offload its loss-making British steel assets for several months but has so far been able to find a buyer. More than 15,000 jobs at its plant in Port Talbot, Wales, are at stake.
In August Tata Motors reported a 57 per cent fall in quarterly profits, slowed by weak sales of its luxury British unit Jaguar Land Rover and foreign exchange losses.
“Tata Motors is not on a sustainable footing, obviously Tata Steel has had its struggles and the Docomo issue is unsettled which is earning Tata a bad name globally.
“Mistry was not giving direction to the individual companies so Ratan Tata has probably just got frustrated and taken back the chairmanship,” a companies analyst, who asked not to be named, said.
Mistry’s sister is married to Tata’s younger half-brother Noel, who was initially expected to be the group successor and is now tipped by some analysts to get the top job.
Mistry squashed speculation that he was considering legal action over his dismissal.
“While the circumstances are being studied, there is no basis to media speculation about litigation at this stage.As and when a public statement becomes necessary, it would be made,” read a statement released by the Shapoorji Pallonji Group.
The group, founded by Mistry’s father, is a major shareholder in Tata Sons and had reportedly been ready to claim that it was illegal to sack the chairman without a 15-day notice period.
The search for a successor to Mistry was likely to take four months, Tata Sons said in a short statement on the dismissal on Monday
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