Cyrus Mistry sacking from Tata: Tale of family discord since 1930s
Following a dramatic announcement and hectic activity, Bombay House is abuzz with mediapersons and whispers of the "mystery" behind Tata Group's 48-year-old chairman Cyrus Mistry's sudden replacement by Ratan Tata.
The discord is out in the open and though much has been left unsaid, and much unwritten, history is repeating itself at Bombay House.
The seeds of the conflict were sown in 1930, when two families - the Mistrys, a construction conglomerate, and the Tatas, then a struggling steel business - came together under circumstances that so many years later have proved to be Cyrus Mistry's undoing.
Cyrus's grandfather Shapoorji Pallonji Mistry, an eminent builder, bought a company in 1930 called FE Dinshaw and Co, which had 12.5 per cent stake in Tata Sons. While Shapoorji sharpened his business skills to enhance his stake in Tata Sons, young JRD Tata objected, but failed to stop him.
By 1938, Shapoorji held 17.5 per cent in Tata Sons, while the Tata Trust held around 80 per cent stake - but the undercurrents in the families were evident.
Ever cautious of Shapoorji's rising stake, JRD took over the Tata Group in 1938, consolidating the Tatas' hold over the business and keeping the family trust (that held 80 per cent of Tata Sons) intact. He also focused on building the brand Tata to ensure that the Tata family ruled the empire.
Shapoorji was smart enough to hold his peace, knowing that his stake was no match for JRD's might, but in a bid to exercise more influence, his granddaughter was married to Ratan Tata's half-brother, Noel Tata.
It was when childless JRD decided to hang his boots and bring in the young Ratan Tata in 1991 that the Mistrys realised they were still the outsiders, with JRD choosing dynamic Ratan over Noel.
 |
| Shapoorji Pallonji Mistry. (Photo credit: Google) |
When young Ratan took over from JRD in 1992, Cyrus was appointed at the board of Shapoorji Pallonji & Co (a firm that his grandfather founded) and later became its MD.
Interestingly, Ratan and Cyrus have seen parallel careers; while Ratan looked at restructuring the Tata Group and driving acquisitions abroad, Mistry spent Rs 60 crore to maintain his family's stake in Tata Sons and even inched it up to 18.5 per cent.
Not only that, when TCS went public in 2003, Cyrus cut the deal that yielded them huge profits. No wonder then that Cyrus was chosen to take his father's place on Tata Sons' board when he stepped down in 2005. Thanks to Cyrus, within six years, the company saw meteoric rise and he gained favour with Ratan Tata.
In 2011, Cyrus was chosen by a committee to be the second person from outside the Tata family to head the group in 142 years, and he got down to work.
While Ratan had focused on acquisitions, especially of overseas assets and including big ticket brands like JLR and Corus, Cyrus went for the jugular.
He decided to trim operations, cut costs and shut down non-profitable businesses. According to sources, the sell-off of Tata Steel UK really rankled the group.
Also, Mistry reportedly focused on new businesses, rather than consolidate old companies.
Thirdly, he reportedly did not take into confidence the old guard and rubbed some of them the wrong way.
But as Cyrus soldiered on, signs of trouble were evident early this August as the company faced headwinds of falling revenue. The Tata Board was expanded with experienced industrialists - Piramal group's Ajay Piramal and TVS Motor chairman Venu Srinavasan were inducted.
So when the Board met to seal the fate of Cyrus, six members, according to sources, voted in favour of the decision to remove him, with two abstaining from the voting.
So far, the core group formed by Cyrus has been disbanded, but whether Shapoorji Pallonji, which continues to be the second biggest shareholder in Tata Sons, will take the legal route remains to be seen.
In its first statement, the Pallonji Group scotched speculation that Cyrus would approach the high court.
For the moment, a new panel has been formed with Ratan Tata part of the process to select the next chairman by February 2017 - but with many names doing the rounds, whether the Tatas will experiment once again outside the family bastion remains to be seen.