Mumbai, India | AFP |
Industrialist Ratan Tata sensationally returned to the helm of India’s biggest conglomerate on Monday as Tata Sons dumped Cyrus Mistry as chairman in a shock announcement that stunned analysts.
The 78-year-old takes interim charge of the sprawling $100 billion tea-to-steel group almost four years after Mistry succeeded him to become the Indian giant’s first chief from outside the Tata family.
Monday’s announcement comes as Tata’s steel arm struggles to offload its loss-making British assets while its carmaking business continues to be plagued by weak sales and a dispute with Japan’s NTT Docomo threatens to damage its international reputation.
“Tata Sons today announced that its Board has replaced Mr. Cyrus P. Mistry as Chairman of Tata Sons. The decision was taken at a board meeting held here today,” the company said in a statement.
It added that Ratan Tata had been named interim chairman until a successor could be appointed — a surprise comeback for the media-shy industrialist, who made way for Mistry in December 2012.
The search for a successor to Mistry, 48, was likely to take four months, the statement said.
“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,” G. Chokkalingam, managing director at Mumbai-based Equinomics Research & Advisory Pvt, told Bloomberg News.
“It is very difficult to attribute it to leadership. Therefore it is shocking.”
Tata Sons is the holding company of the massive Tata Group, arguably India’s most famous family conglomerate, which spans at least 100 companies in as many countries.
Its businesses include one of India’s largest IT firms, Tata Consultancy Services, the biggest vehicle maker Tata Motors, and a ritzy hotel chain which includes Mumbai’s Taj Mahal palace hotel.
Tata brands also feature daily in the lives of Indians, with products ranging from salt to watches.
Mistry was named as Tata’s heir more than a year before he assumed the role. He is related to the famous Indian family through his sister’s marriage.
Ratan Tata, who took over as chairman of Tata Sons in 1991 and led the company for 21 years, is credited with building it into a global behemoth.
During his time at the helm, the organisation went on a global purchasing spree, acquiring major names ranging from Tetley Tea to Land Rover and the Anglo-Dutch steel firm Corus in 2007 for $13.7 billion.
However, Mistry’s time in charge has been rocky and the group, founded under British colonial rule in 1868, has hit headwinds of late with lacklustre performances at several companies including Tata Motors, Tata Power and Tata Steel.
Profits at India’s IT outsourcing companies are also being squeezed as the sluggish global economy sees clients rein in their spending.
The group’s revenue slipped 4.6 percent for the financial year ended March to about $103 billion, hurt by global economic uncertainty, a crash in commodity prices and volatility in currencies, according to Bloomberg.
It has been trying to offload its loss-making British steel assets for several months but has so far been able to find a buyer. More than 15,000 jobs at its plant in Port Talbot, Wales, are at stake.
Mistry been unable to resolve a long-running dispute with Docomo which is demanding that Tata coughs up a $1.17 billion arbitration payment awarded to the Japanese mobile phone operator at an international hearing.
In August Tata Motors reported a 57 percent fall in quarterly profits, slowed by weak sales of its luxury British unit Jaguar Land Rover and foreign exchange losses.
“Tata Motors is not on a sustainable footing, obviously Tata Steel has had its struggles and the Docomo issue is unsettled which is earning Tata a bad name globally.”
“Mistry was not giving direction to the individual companies so Ratan Tata has probably just got frustrated and taken back the chairmanship,” a companies analyst, who asked not to be named, told AFP.
Mistry’s sister is married to Tata’s younger half-brother Noel, who was initially expected to be the group successor and is now tipped by some analysts to get the top job.