Tata Sons Unexpectedly Removes Cyrus Mistry as Chairman -- 2nd Update
October 24 2016 - 11:30AM
Dow Jones News
By Debiprasad Nayak and Santanu Choudhury
MUMBAI--Tata Group, one of India's largest conglomerates,
abruptly removed its chairman Monday, replacing him temporarily
with his predecessor, a member of the company's founding
family.
Tata Group spans dozens of businesses, from salt to software,
with collective revenue of more than $100 billion. Among the
group's holdings: U.K.-based Jaguar Land Rover Automotive PLC and
Tetley Tea.
In a move that surprised analysts and investors, the board of
the group's holding company, Tata Sons Ltd., ousted Chairman Cyrus
Mistry saying it was acting "for the long-term interest" of the
company.
Mr. Mistry will continue to be a director on the board of Tata
Sons, a Tata spokeswoman said.
Mr. Mistry couldn't be reached and a call to Shapoorji Pallonji
& Co., the construction company of his father which owns 18% of
Tata Sons, went unanswered after business hours on Monday.
Former head of Tata Group, Ratan Tata, one of India's best-known
businessmen and philanthropists, is to serve as interim chairman
for four months while a selection committee chooses a successor.
The company said the CEOs of the group's many operating companies
weren't changing.
Aside from a terse statement announcing the change, the company
had little to say about the sudden shift.
"It's actually stunning," said Ramesh Damani, a member of BSE, a
Mumbai-based stock exchange. "This doesn't happen at Tata."
Mr. Damani said the fact that no reason was given for Mr.
Mistry's departure would make investors nervous.
Mr. Tata, known for strict ethics despite India's at-times murky
standards of corporate governance, stepped down as chairman in
2012, but remained an adviser.
Mr. Mistry, the son of construction baron Pallonji Mistry whose
firm is the largest shareholder in Tata Sons, took the helm of the
group and has led it through some volatile times. Some businesses
have thrived and others have struggled. Tata Steel in particular,
has suffered amid a global glut and is trying to sell plants in the
U.K. that it acquired in 2007.
Mr. Tata is known for boldly expanding Tata into foreign markets
through multibillion-dollar acquisitions of U.K. steelmaker Corus
Group as well as Jaguar and Land Rover brands. Mr. Tata also backed
Tata Motors' push to build the world's cheapest car, the Nano,
which got a lot of attention around the world for its less than
$2,500 sticker price but didn't sell as well as many analysts had
anticipated.
Mr. Mistry, a Mumbai native, studied civil engineering at
Imperial College London and management at London Business School
before going full-time into Shapoorji Pallonji, the family
construction business.
Like Mr. Tata, the younger Mr. Mistry hails from the close-knit
Parsi community--descendants of refugees from Persia who sought
asylum in India centuries ago. He is an Irish national by virtue of
his father's marriage to an Irish woman. Though he doesn't bear the
Tata surname, he is linked to the family through his sister's
marriage to Ratan Tata's half-brother Noel Tata, who was once
considered a contender for the chairman's post.
At the time of his appointment, some analysts said they were
concerned that Mr. Mistry might struggle to manage and revamp such
a sprawling conglomerate. Analysts said he had been trying to
streamline the group to focus on few good businesses which could
have ruffled some feathers within the 148 year old group.
Investors said they were waiting for more details about the
rationale behind the removal of Mr. Mistry, whether he and his
family plan to fight it and who might eventually replace him.
"We need some information to understand the underlying motive
for the move," said Jonathan Schiessl, chief investment officer at
Ashburton Investments, which manages around $10 billion, some of
which is invested in Tata Motors.
Shefali Anand in Mumbai and Preetika Rana in New Delhi
contributed to this article.
Write to Debiprasad Nayak at debi.nayak@wsj.com and Santanu
Choudhury at santanu.choudhury@wsj.com
(END) Dow Jones Newswires
October 24, 2016 11:15 ET (15:15 GMT)
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