The abrupt ouster of Tata Group chairman Cyrus Pallonji Mistry, 48, nearly four years after he took over the reins of the over $100-billion automobiles-to-salt conglomerate was a speedy surgical operation.
Mistry's dramatic removal was announced by Tata Sons, the holding company of India's biggest business group, following a hastily convened board meeting on Monday, October 24, that lasted a mere 30 minutes.
It was followed soon after by a statement from 78-year-old Ratan Tata, former Tata Sons chairman and Mistry's predecessor, saying: "A new management structure is being put in place and a selection committee has been constituted to identify the next Chairman of Tata Sons."
Tata also announced his comeback to the helm of the conglomerate, saying that he would serve as interim chairman for four months, to guarantee stability until a permanent replacement is found.
"The committee has been mandated to complete the process in four months. In the interim, the board has requested me to perform the role of Chairman and I have agreed to do so in the interest of stability of and reassurance to the Tata group."
The decision left the corporate world in a tizzy with questions being raised as to why Mistry was suddenly replaced. Strangely, the group gave no official reason for removing Mistry but insiders suggest the board was not happy with the way he was dealing with the group's loss-making businesses.
This seemed to be more or less confirmed by V R Mehta, a trustee on the Sir Dorabji Trust, one of the several charities that collectively own over a 60-percent stake in the behemoth, granting them a powerful say over the group's affairs.
Talking to India's NDTV television, Mehta said there was disconnect between the trusts and the Tata group under Mistry's chairmanship.
"The trusts were concerned about falling revenue (since Mistry took over) - funds for charitable work were drying up. There's been divergence since Mistry took over on values and ethics. The trusts' concerns were a major factor in Cyrus' removal. Probably, no choices were left," Mehta was quoted as saying.
In 2012, Mistry became the first outsider from the founding family to head the group. He succeeded Ratan Tata, who had led it for over two decades and turned it into a global corporate giant by acquiring world renowned brands like Anglo-Dutch steel firm Corus, Britain's Tetley Tey and automaker Jaguar Land Rover (JLR).
Established by Parsi industrialist Jamsetji Tata in 1868, the Tata group is arguably India's most prominent family conglomerate, making everything from salt and tea to steal and luxury cars. Tata Sons is the holding company of the group, whose individual firms operate in over 100 countries worldwide.
In recent years, however, the group has encountered increased financial snags as a result of the adverse global economic environment as well as a host of other problems, including fluctuating commodity prices and volatile currencies. A high debt burden, amounting to some $30 billion, has also compounded its troubles.
Against this backdrop, Tata Group's revenue slipped 4.6 percent for the financial year ended March to about $103 billion.
To revive its financial fortunes and slash its mountainous debt level, Mistry had been selling assets that Ratan Tata had acquired by spending billions of dollars.
Tata Steel is a case in point. Under Ratan Tata, it bought Anglo-Dutch steelmaker Corus in 2007 by paying $12 billion and emerged as the world's fifth-largest steel company. It was the biggest-ever foreign acquisition by an Indian firm and of half of the cost was funded through debt.
A year after the takeover, though, the global financial crisis struck from which the world economy has yet to completely recover. While this has had a negative impact on the worldwide demand for steel, cheap imports from China have also been accused of causing a glut and depressing prices.
As a consequence, Tata Steel has been struggling financially; the company last month reported a quarterly net loss of almost 32 billion rupees ($475 million). To turn it around, Mistry focused on selling its unprofitable British assets.
But Ratan Tata is said to have been at odds with this approach, arguing instead for the company to hold on to its assets for the long term and not reduce its global reach.
No litigation for now?
The abrupt sacking of Mistry on Monday came in this context. It's reported that at the board meeting, Mistry called his dismissal illegal, pointing out that he should be given a 15-day notice to make a case for himself according to the company's rules.
With speculation swirling around the exact reasons for Mistry's dismissal and with the boardroom tussle possibly ending up in courtrooms, Ratan Tata's battery of lawyers filed "caveats" in different courts including with the National Law Company Tribunal on Tuesday.
A caveat is a legal instrument to prevent, in this instance, any one-sided orders being passed against the board's decision if Mistry or his family's Shapoorji Pallonji (SP) Group, which is involved in construction, moves court against his ouster as chairman of Tata Sons.
On his part, Mistry has kept a studied silence and not revealed his future course of action. "Neither the SP Group nor Cyrus Mistry have made any statement yet. While the circumstances are being studied, there is no basis to media speculation about litigation at this stage. As and when a public statement becomes necessary, it would be made," was the statement issued by Mistry's official spokesperson.
Still, analysts say the whole imbroglio at the apex of the organization is likely to stain the organization's reputation. The unceremonious dismissal of the chairman also comes at a time when Tata's image abroad is put to test due to the company's legal battle with NTT Docomo. The Japanese telecom firm is seeking a $1.17 billion arbitration payment from Tata that was awarded to it by an international tribunal.
"It could take a new leader 10 years to get control of things and maintain Tata Group's image," Mahesh Singhi of corporate advisory firm Singhi Advisors told the AFP news agency.