Ratan Tata took back control of India’s biggest conglomerate after Chairman Cyrus Mistry abruptly ended his four-year reign over the $100 billion coffee-to-steel business empire.
Tata, 78, will be interim head of the group while a panel appointed by the company searches for a replacement. Mistry, 48, was named to replace Tata as chairman in December 2012.
The move threatens to leave a vacuum in the group at a time when Mistry was raising cash, refinancing loans and selling assets after writing them down, in an attempt to tackle mounting debt. Tata Steel Ltd., which bought Corus Group Plc in 2007, has been cutting operations in the U.K. since the 2008 global financial crisis.
“This is just too bizarre that the chairman of the biggest industrial group in
the country has been removed in such an arbitrary manner,” Gaurang Shah, vice president at Geojit BNP Paribas Financial Services Ltd. in Mumbai, said by phone. “The Tata Group owes an explanation so to why such a sudden decision has been taken. There will be some knee-jerk reaction on the stock prices of Tata Group companies.”
The company has appointed a panel comprising of Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Kumar Bhattacharyya to find a new chairman, Tata Sons said in a statement on Monday. The committee has been mandated to complete the selection process in four months, according to the statement.
The decision was taken collectively by the board of Tata Sons in the long term interest of the company and on the recommendation for the principal shareholder of Tata Sons that is Tata Trusts, a trust spokesman, who declined to be identified, said by phone. Mistry will remain a director of the individual companies, he said.
About 66 percent of the equity capital of Tata Sons, the group’s holding company, is held by philanthropic trusts endowed by members of the Tata family.
“This is just too shocking,” said G. Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory Pvt. “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. It is verydifficult to attribute it to leadership. Therefore it is shocking.”