Mistry falls victim to unrealistic expectations

The manner in which the chairman of the giant conglomerate Tata group Cyrus Mistry was dumped by its board of directors a mere four years into his term for which he had been hand-picked in a rigorous selection has sent shock waves in Indian corporate circles. Mistry was only the second non-Tata in the group’s chequered history and had taken the reins from Ratan Tata in 2012. To Ratan Tata’s 78 today, he is only 48. It would not be a misstatement to say that Mistry fell victim to new thinking and to unrealistic expectations.

Since no reason has been given for the sack, there is intense speculation over specifically what went wrong. Analysts say in the eyes of the board, Cyrus Mistry had failed to lift the large and diverse conglomerate’s financial performance. Emblematic of the difficulties were the decision to divest the flagship Tata Steel’s struggling U.K. steel assets — the company had acquired Corus Plc in 2007 for $13.1 billion — and his failure to resolve a bruising corporate-divorce with Japan’s NTT DoCoMo. While two of the group’s bluechips, Tata Consultancy Services and Tata Motors outperformed the benchmark BSE Sensex during Mr. Mistry’s 46-month reign, appreciating as much as 92 per cent and 81 per cent respectively, four other key group companies underperformed.

The prognosis was that Tata Trusts, the principal shareholder of Tata Sons with a 66 per cent stake, had not been impressed with Mr. Mistry’s performance and bore the hurt that Mr. Mistry had tried to undo several initiatives taken by Ratan Tata. While there are two opinions over whether Shapoorji Pallonji which

controls 18.4 per cent shares in the conglomerate and whose torch-bearer Mistry was, would challenge the dismissal in court, there is little chance of a victory for Mistry.

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