Cyrus Mistry has been removed from his position of chairman of Tata Consultancy Services (TCS) and replaced by Ishaat Hussain as the battle between Tata Sons’ former chairman and the company intensifies.
Former chairman and significant shareholder of Tata Sons, Cyrus Mistry suffered yet another ouster from a post he held at a Tata group company. Replaced by Ishaat Hussain, Cyrus Mistry is still positioned in key posts in other companies of the group. No board meeting was held by TCS but Tata Sons, as a majority shareholder of the company, exercised its power in nominating a chairman. Hussain will reportedly replace Mistry as chairman until a permanent appointment is made to the board. “Mr Mistry has ceased to be the Chairman of the Board of Directors of the Company and Mr Hussain is the new Chairman of the Company. The Company has been further informed that Mr Hussain shall hold office as Chairman of the Company until a new Chairman is appointed in his place,” the company shared in a statement.
In a move that surprised many, Hussain was nominated as TCS chairman, who was incidentally among the two abstaining members during the board meeting deciding Mistry’s fate in the company held late last month. This meeting had resulted in Mistry’s removal from the post of chairman for Tata Sons. After his removal, Mistry has made a series of allegations over the workings of the company which has largely been denied by the Tata Group. In the latest episode, Mistry was replaced by Hussain, who is one of the oldest members of Tata Group at present.
Hussain, who has held the position of senior vice president and executive director of finance at Tata Steel for around 10 years and has also served at an executive board position at Tata Sons before working as the finance director of the holding company. He is also an appointed director in several Tata group firms such as Tata Industries, Tata Steel and Voltas. Hussain also participates as a member of the Securities and Exchange Board of India (Sebi) in their committee on insider trading and primary capital markets. He is also a member of the Confederation of Indian Industries finance committee.
Many battles to be fought
Tata Sons alleged today that ousted chairman Cyrus Mistry abused the trust it had placed in him and tried to establish control over most of the Tata group, to an extent of “the exclusion of Tata Sons and other Tata representatives.” The nine-page statement is the first elaboration of causes behind the decision to remove him from his post of chairman on October 24. “It is unfortunate that Tata Sons, acting in good faith, did not anticipate such devious moves by Mr Mistry and thereby did not inform the other directors of the operating companies about its dissatisfaction with Mr Mistry at the level of Tata Sons. However, we will now do whatever is required to deal with this situation,” the group holding company said in the statement. The statement also tied the decline in market share of Tata Motors Ltd in both passenger vehicles and commercial vehicles business over the past three years to Mistry and blamed him for the same. Tata Group has kept a strict control over its image and values, which it has alleged Mistry went against.
As Mistry still holds key positions in several companies under the Tata Group, the company attempts to relieve him off of all duties. The move of replacing him as TCS chairman has taken place at a crucial moment when another company within the group, Tata Chemicals, is set to meet to assess September earnings. Not all group companies are set for a smooth transition as Mistry is still being backed in board positions. One such company, Indian Hotels Co Ltd (IHCL) saw its independent directors unanimously supporting Mistry’s position as chairman. However, Tata Sons has requested a meeting to decide on the issue of the removal of Mistry from his position.
Immediately after Mistry’s removal from position of Chairman of Tata Sons, Tata Group stocks saw a negative impact with major Tata group stocks such as Tata Steel, Tata Communications, Tata Steel, Tata Motors, Tata Power, Tata Chemicals and TCS declining by up to 3 pc. The Pallonji Group, chaired by Mistry’s father, Pallonji Shapoorji Mistry, is also a significant shareholder in Tata Group, with over 18 pc ownership. They are likely to challenge Tata decisions and add to the opposition against removal of Mistry from key positions. Alongside a series of board meetings on the way, the battle between Mistry and Tata has only just begun.