The current disquiet within the $180 billion Tata Group is much more than a boardroom battle for control and strategy.
According to two individuals close to Tata and the two Mistry families involved, it was above all a change in sentiment among the players involved that caused a sensation in the boardrooms.
“What appears to be a power struggle within the board is essentially a shift in old family relationships that have experienced emotional turmoil in the past and are undergoing a reorganization of interests for a cause driven by community interest and not any corporate philosophy,” said one of the people in the inner circle of Parsi families involved.
It is learned that all the Parsis on the board of directors of Tata Trusts have come together in favor of the Shapoorji Pallonji (SP) group.
This unity was allegedly brought about by the elderly women of the two Mistry families, the SP group and the Meher Pallonji (MP) group. “There are no ministers involved in this part of the drama,” said one of the people cited above. “These women have also contacted Noel Tata to help the SP group which is still recovering from the untimely death of Cyrus Mistry in addition to the financial stress it is dealing with,” said one of the two people.
The two families having a common patriarch three generations ago drifted apart over the years and their relations deteriorated when Cyrus Mistry, appointed chairman of Tata Son in 2012, objected to some large-scale contracts awarded to the MP group on financial terms he considered exorbitant.
In 2016, MP Group’s Mehli Mistry sided with Ratan Tata in his efforts to oust Cyrus Mistry from Tata Sons. Relations between the two families became even more strained after this episode. However, this seems to have changed now.
Tata Trusts has seven directors, including chairman Noel Tata, vice-chairman Venu Srinivasan, Mehli Mistry, Darius Khambata, Pramit Jhaveri, Jehangir HC Jehangir and Vijay Singh, whose proposed reappointment to the board of Tata Sons led to a face-off which was to be resolved through the intervention of Home Minister Amit Shah. and Finance Minister Nirmala Sitharaman.
Tata Trusts is the largest shareholder in Tata Sons with 66% stake, followed by SP Group with 18.4% stake. The umbrella arm of the Tata group has 30 listed companies, with businesses ranging from salt to software and automobiles to defense, operating under its umbrella.
At the heart of the current dispute is the Tata Sons list. SP Group has been pushing for the holding company to go public in order to liquidate its massive assets which remain locked and inaccessible to the group.
The group has accumulated a huge debt amounting to around $1.2 billion and is in dire need of funds. In a statement issued on October 10, the group said the public listing of Tata Sons is not just a financial decision but “a moral and social imperative”.
“We firmly believe that the listing of this premier institution will not only uphold the spirit of transparency envisioned by its founding father, Shri Jamsetji Tata, but will also build trust and confidence among all stakeholders – employees, investors and the people of India,” the statement said.
But beyond the emotion, the friction had a ticking sound in the background.
Besides, the Reserve Bank of India had made it mandatory for Tata Sons to list publicly by September 30, as per the ladder-based regulatory framework it introduced in 2002. This framework classified non-banking financial companies into four tiers based on a few parameters. Given its large-scale investments in group companies and significant borrowings, Tata Sons has been classified in the upper tier of the RBI classification.
The Tata group, however, was not in favor of a listing. Incidentally, it was Tata Trusts that took the initiative in asking Tata Sons Chairman Natarajan Chandrasekaran to explore options to keep the listing going remotely.
But at present, a majority of directors would be in favor of listing Tata Sons to help the SP group.
The grouping of Parsis within the Trust, however, put Noel Tata in a difficult situation. “On one hand, the Parsi group expects Christmas to be in unison with them and on the other hand, the professionals of the group demand that he defends the interests of Tata,” said one of the people cited above. This partly explains the dispute between Noel Tata and the group led by Mehli Mistry.
