 "In this file photo of Ratan Tata with Cyrus Mistry. Tata Sons on Monday removed Cyrus Mistry as its Chairman, nearly 4 years after he took over the reins of the group. Tata makes a comeback, taking over as the company's interim boss for 4 months.")
The Tata Group on Monday initiated the process to oust former Tata Sons chairman Cyrus Mistry as director in group companies, with unlisted Tata Industries becoming the first company to remove Mistry as a director in an extraordinary general meeting (EGM) held here on Monday.
The shareholders of Tata Consultancy Services (TCS) are meeting on Tuesday in Mumbai to oust Mistry that may see a face-off between Ratan Tata, who will be attending the meeting, and his former protégé Mistry.
At the same time, Mistry is expected to make his first public comments in the EGM, citing the steps taken by him to guide TCS as its chairman and as a director.
The mood at the war rooms of both the Tata camp situated at Bombay House and of Mistry camp at SP Centre at Colaba is tense, with Tatas expecting a legal battle at a later date.
As a result, lawyers from both sides would be attending the shareholders’ meeting, with the entire proceedings expected to be videographed to prepare groundwork for any legal challenge at a later date.
Tata’s presence at the meeting is to give a confidence booster to the Tata officials, who are currently finding themselves in the crossfire between the warring duo.
A class action suit has already been filed by six minority shareholders last week at the Bombay High Court (HC) complaining against Tata and seeking damages. The shareholders said they were aggrieved, as the market value of Tata Group companies fell by Rs 1 lakh crore since the controversial removal of Mistry on October 24.
The Bombay HC has asked the petitioners to give an advertisement, so that other shareholders can also join the petition.
TCS shareholders also have reasons to complain, as they have lost 9.1 per cent of their wealth or around Rs 43,664 crore. Analysts said the outcome of Tuesday’s meeting is a foregone conclusion, as Tata Sons holds 73.3 per cent stake in the company and it would be easier for the group to remove Mistry.
The TCS EGM would be followed by Tata Teleservices EGM on Wednesday. The EGMs of Indian Hotels, Tata Steel, Tata Motors and Tata Chemicals will be held next week and Tata Power on December 26.
Among the listed companies, TCS was the first to remove Mistry as chairman and replace him by Ishaat Hussain on November 10. Mistry had termed his ouster as chairman ‘illegal’.
Just before the EGM on Tuesday, Tata wrote to all group company shareholders, saying it was necessary to remove Mistry, as the board of Tata Sons had lost confidence in him. Mistry, too, retaliated and appealed to shareholders of TCS to take an informed decision at the EGM. In a letter dated December 5, Mistry said the company had no reason to be swayed by the conduct of Tata Sons. “Tata Sons does not guarantee any financial assistance for your company. In fact, your company has done its best to help Tata Sons retain its equity ownership,” said Mistry.
Meanwhile, advisory firms are asking shareholders to vote against removing Mistry. “Tata Sons hasn’t provided any compelling reason for the removal of Mistry as a director from the boards of the operating companies. Mistry continues to have beneficial shareholding of three to 13 per cent in the listed companies, through the 18.4 per cent minority shareholding in Tata Sons. His presence as a director on the boards of the listed companies should be a balance on the boards and a representation of the minority shareholder. In many operating companies, Mistry continues to have the confidence of the independent directors,” said a report by InGovern Research Services.
InGovern said Mistry has “skin in the game” unlike Tata. “SP Group holds 18.4 per cent in Tata Sons, which holds 73.33 per cent in TCS. This gives SP Group a beneficial interest of 13.48 per cent in TCS. If this beneficial interest had been a direct stake in the company, it would have been the largest stake after the promoters and much higher than the largest public shareholder Life Insurance Corporation’s 3.21 per cent stake in TCS. For a director representing a beneficial stake of 13.47 per cent, which ranks second among all shareholders of the company, and having received a favourable rating in his evaluation, there is no logic for his removal from the board,” said the report by InGovern. Mistry also holds 4.1 million shares in TCS in his personal capacity.
Advisory firm IiAS asked to vote for Mistry’s removal. “With his removal as chairperson of Tata Sons, Mistry’s continuing on TCS’ board as a non-independent director becomes untenable. While this must not be construed as an endorsement of his removal, we believe his removal will provide the Tata Group a clean slate to fix the larger structural issues of the group,” said an IiAS report. Another proxy firm SES has also supported Tata’s move to oust Mistry.
| TCS shareholding pattern | |
| (As of Sept 2016) | |
| in % | |
| Promoters | 73.33 |
| FIIs | 17.02 |
| Insurance companies | 4.10 |
| Mutual funds/UTI | 0.98 |
| Retail & HNI | 3.98 |
| Others | 0.59 |
| UTI: Unit Trust of India | |
| FII: Foreign Institutional Investors | |
| HNI: High net worth individual | |
| Sources: Capitaline, exchanges | |
| Compiled by BS Research Bureau | |
| Market cap | |
| Date | Rs crore |
| 24-10-2016 | 478384 |
| 12-12-2016 | 434720 |
| Change | -43664 |
| % change | -9.1 |
