15 March 2018 05:22:38 IST

When the halo slipped a little

Ratan Tata

Can the Tatas find an appropriate response to Cyrus Mistry’s letter?

Cyrus Mistry’s letter has changed the perception of his feud with the Tatas — represented by Tata Sons and Tata Trusts, both of which are now chaired by Ratan Tata.

Ever since the shock announcement of his removal as the Chairman of Tata Sons was made, most reports speculating on the reasons hinted that the fault might be his. Did the companies perform well enough under him? Was the Group Executive Council (set up by Mistry) becoming all powerful and dictating terms to the Managing Directors of the group companies?

There were reports about the clash of cultures between Tata Sons and Tata Trusts after Mistry took over in 2012. Most thought that the scion of the Shapoorji Pallonji-empire might have diluted the ethics of the Tata Group, which is known for sticking to them.

The silence from Bombay House only increased the gossip-mongering. But Mistry’s letter, detailed and anecdotal, has tilted the scales. And the man, known for his penchant for numbers, has used them wisely to drive home his points.

So how has his five-page letter to the Directors of Tata Sons helped Mistry?

The other side

The 48-year-old has made a forceful presentation of his side of the story, which even evokes some sympathy.

He wasn’t given a chance, says Mistry, to defend his job; a job that he had reluctantly accepted after Ratan Tata approached him the second time in 2011. If that was not enough, once he took over from Tata, Mistry found his powers curtailed after amendments were made to the Articles of Association, rendering him a lame duck Chairman .

Second, Mistry reminds the Directors that he didn’t create the mess the Group finds itself in.

He analyses the ‘legacy hotspots’ that he inherited from Ratan Tata — Tata Steel Europe, The Indian Hotels Company (IHCL), Tata Motors, Tata Power Mundra and Teleservices. In each case, he uses numbers to back up his points (for instance, the $10 billion impairment in Tata Steel Europe, losses in the Nano project, and the most lethal — these companies could face a write-down of $18 billion, more than the net worth of the Group). Surely he wasn’t responsible, Mistry seems to be screaming from the letter, for this turmoil.

He points to a case of corruption in Air Asia, and narrates the incident of a board meeting being held up because a couple of Directors had gone to “obtain instructions from Mr Tata.”

That is not the only potshot Mistry takes at his predecessor; in the case of Tata’s pet project Nano, Mistry says only emotional reasons have kept the group from shutting it down.

Third, Mistry points to the progress the group has made in these four years since he took over.

Despite the grievous issues, Mistry reminds the Directors that the Group had done well under him — cash flows had increased, market cap of the companies had gone up and Tata Sons’ net worth jumped by more than a half.

As much as it helps prop up Mistry, the letter has done some irreparable damage to the Tata Group. A Tata old timer I talked to, despaired at the situation. “I regret joining the Group,” he said.

And after this damaging letter, anyone willing to become the next Chairman of Tata Sons would want answers to all the questions raised by Mistry. It won’t be surprising if the next leader comes from within.

The ball is now in Tata’s court.