The Tata Group has been going through a pretty tough patch lately. However, there were expectations that things would get better after patriarch Ratan Tata was brought back to helm Tata Sons. However, things still appear to be in major turmoil. On Thursday, Tata Consultancy Services (TCS) sacked Cyrus Mistry as its chairman, replacing him with Ishaat Hussain as interim chairman.
The move comes barely a month after Mistry was removed as Chairman of Tata Sons, after growing discontent between Mistry, some of the group’s directors, and top shareholder Tata Trusts. However, he was allowed to keep his position as Chairman of various other companies of the Tata Empire — including Indian Hotels, Tata Steel, Tata Motors and Tata Chemicals.
Mistry was also the Chairman of the Tata Group’s flagship company TCS, which decided to replace him with Ishaat Hussain on Thursday. The company said that it had received a letter from top shareholder Tata Sons, in which it was instructed to oust Mistry and replace him with company veteran Ishaat Hussain. The IT firm, which has lately been bankrolling and covering the losses generated by other Tata companies, confirmed as much through a statement.
In view of this, Mistry has ceased to be the chairman of the board of directors of the company, and Hussain is the new chairman of the company.
Tata Sons holds over 70 percent shares in TCS, which is Tata Conglomerate’s key company and the source of most of its revenue. It is also the most important company within the group and removal from the Chairmanship is certain to have dealt the Mistry camp a severe blow. It would appear that Tata Sons is quite ready to take central positions away from Mistry. Other groups in the company,, which still have Mistry as their Chairman, are expected to follow TCS’s example too.
For example, Indian Hotels Co. a Tata group company that manages the Taj chain of hotels, also released a separate statement on Thursday where it said that an extraordinary general meeting of shareholders had been called to consider a resolution to remove Mistry as director.
However, the battle between the Tata and Mistry factions could get bitterly contested from now onwards.
From what we have seen so far, Tata Sons will likely attempt to wrest these companies away from Mistry’s control as well. However, the Former Tata Sons Chairman, may not chose to go as quietly every-time. Also, with the exception of Tata Power and TCS, which have a clause which allows their majority shareholders to simply nominate the Chairman, removing Mistry from the rest of the Tata companies will require board meetings.
While Tata Sons holds over 70 percent of shares in TCS, it does not hold such an overwhelming majority in many other companies belonging to the Tata Group — which still have Mistry in positions of significant power and authority. As such, we may be witness to a drawn out and messy contest as India’s most prestigious company attempts to set its internal affairs straight.