December 20, 2016 / 3:36 AM / 9 months ago

BREAKINGVIEWS- Tata is $10 bln poorer post-Mistry

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

By Una Galani

HONG KONG, Dec 20 (Reuters Breakingviews) - Good governance and a strong reputation matter. That is the main message from the Tata group’s two-month battle with ousted Chairman Cyrus Mistry. He has now resigned from the boards of various companies within the Indian software-to-salt conglomerate, but not before inflicting plenty of damage.

A war of words between Mistry and patriarch Ratan Tata has illustrated the urgent need for reform, in particular at the cosy board of the unlisted holding company, Tata Sons, and its relationship with the philanthropic trusts that control it. In the mudslinging, neither Mistry nor Ratan Tata have come out looking good.

Investors have voted with both their hands and their feet. In a stinging rebuke to Ratan Tata and Tata Sons, less than one-third of independent shareholders supported a motion last week to remove Mistry from the board of Tata Consultancy Services, India’s biggest company by market value - even though Tata Sons’ controlling stake ensured he would have got the axe.

The combined value of Tata’s top ten listed firms, including Tata Motors and Tata Steel, has fallen by more than $10 billion since the saga has unfolded. Granted, India’s benchmark CNX Nifty 50 has also fallen amid a broader cash crunch in the country. But that total is $2 billion more than the theoretical loss if the ten firms’ performance had merely tracked the index.

In fact, strip out TCS, the IT giant whose shares were already under pressure, and Tata group company shares have fallen twice as much as the market. The mess is a sharp reminder that it pays to be a well-run public company.

On Twitter twitter.com/ugalani

CONTEXT NEWS

- Cyrus Mistry, the ousted chairman of Tata Sons, said on Dec. 19 that he would resign from the boards of all listed Tata companies, but he vowed to keep fighting to improve governance within the $100 billion software-to-salt Indian conglomerate.

- In a letter to shareholders, Mistry hinted that he plans to continue his battle against Tata Sons in court. “I think it is time to shift gears, up the momentum, and be more incisive about securing the best interests of the Tata Group,” Mistry wrote. “It is with this thought in mind that I have decided to shift this campaign to a large platform and also one where the rule of law and equity is upheld,” he added.

- Mistry has waged a war of words against Tata Sons and family patriarch Ratan Tata, who is back at the helm of the conglomerate on an interim basis. Mistry was removed from his role as chairman of Tata Sons on Oct. 24. Tata Sons calls Mistry’s allegations “baseless, unsubstantiated and malicious.”

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Editing by Quentin Webb and Katrina Hamlin

Our Standards:The Thomson Reuters Trust Principles.
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