India’s $100bn steel-to-software Tata conglomerate sharply escalated a battle with its ousted chairman Cyrus Mistry, sacking him as head of the group’s flagship business and blaming him for nearly pushing the group holding firm into losses.
Tata Consultancy Services (TCS), India’s No 1 software services firm by revenue, removed Mistry as chairman yesterday and appointed group veteran Ishaat Hussain as interim chairman.
And, in a nine-page statement to the media, group holding company Tata Sons said under Mistry’s leadership, it would have reported operating losses over the past three years if not for dividends from TCS. In its statement, Tata Sons said “significant dependence” on TCS under Mistry’s stewardship was a source of concern for its directors and shareholders.
The moves come after Mistry was axed as chairman of Tata Sons in a boardroom coup last month, and family patriarch Ratan Tata was brought back to helm the company temporarily.
Over the past two weeks the Tata and Mistry camps have traded barbs on a regular basis, leading to a drop in share prices of listed Tata entities and sparking concern among shareholders and other stakeholders.
Tata Sons has said Mistry was removed because of a ‘trust deficit’ between him, its directors and top shareholder Tata Trusts.
It said yesterday it has received queries from across the globe about the move and added it would like to put forward some facts so the decision is seen in the “desired perspective.”
Mistry in turn has blamed Ratan Tata for some of the company’s biggest debacles and decisions, and alleged failures in corporate governance at Tata Sons and some group companies.
TCS, the cash cow for Tata Sons, said in a statement it received a letter from top shareholder Tata Sons nominating Hussain as chairman. “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,” it said.
A source close to Mistry, however, challenged Hussain’s appointment, saying the TCS board needs to approve it. While the move to remove Mistry from the helm of TCS had been expected by analysts, interim chairman Tata is now working to wrest control of other key group companies still chaired by Mistry.
Indian Hotels Co, a Tata group company, said in a separate statement on Thursday it has called an extraordinary general meeting of shareholders to consider a resolution to remove Mistry as director. Indian Hotels owns the Taj hotels.
Mistry, however, is still chairman of key Tata group companies like Tata Steel, Tata Motors and Tata Chemicals, whose board of directors will meet over the next few days to discuss quarterly results. Tata Sons owns about 30 % stakes in these companies which means removing Mistry as chairman may not be as easy as in the case of TCS, in which Tata Sons’ shareholding is more than 73 %, lawyers have noted.
Shares in TCS were down more than 1% in late afternoon yesterday and shares of Indian Hotels fell nearly 4%, in a Mumbai market that was up 0.9%.