Is this the end of the Tata Empire?
Nearly four years ago when Cyrus Mistry became chairman of the Tata Sons Board, one of India's largest conglomerate, he inherited a huge mess left over by his predecessor.
Nearly any company your pick from the Tata stable, mismanagement from the top is clearly written over them. Like a sarkari company, they all are moving along in a zombie kind of way, knowing that their name would survive them.
Indeed, Ratan Tata started off his own stint at Tata started in the 70s with big duds like NELCO and Empress Mills that failed badly. In recent years, his Nano project was by and large a media hype and nothing else. You declare a car for 1 lakh, sell it for more than that, and then the cars keep burning on roads. They are not sold properly, they have quality issues. Again, the name kept him going. In another company, in another country, perhaps the chairman would have been asked questions. Here, things were coated in PR about affordable cars which no one wanted.
Look at the Indian Hotels - Orient Hotels deals. A disaster. The decision to expand and open hotels around the world, when you barely have cash and demand is shrinking also is questionable.
And then Ratan Tata decided to buy Corus. In the Indian share market history, one of the worst examples of fooling shareholders would be the Corus deal. It drove Tata Steel to an abyss of debt and uncertainty but thankfully the Chairman who pushed it, was a Tata so all was okay.
If one looks at the agreement with Japanese company DoCoMo, who would agree to give a partner a fixed amount of money (huge amount of money) in case things don't work out? Even to the untrained eye, it would seem to be a weird idea.
Even while picking his successor, Ratan Tata took a lot of time. Compare this to L&T and ITC where Chairmen are already grooming their successors and preparing them for the big role. It shows a business maturity and sensibility. And when he did find a successor, he chose the son of the largest individual shareholder of Tata Sons.
Cyrus may have ruffled feathers, especially while cutting down dividends of group companies. But the mess in which they are, does it even make sense to pay heavy dividends?
Like a feudal lord, disturbed with his legacy and shrinking importance, Ratan Tata wrested control from Cyrus in a childish immature manner. It was surprising that several lawyers were handing out media statements on behalf of Tatas, filing caveats and preparing for war, when Cyrus hadn't even responded yet.
I think in this whole turn around, Cyrus Mistry came out to be the winner. Why spend all this time, at Tata Sons when he can work with his father, Shapoorji, a business magnate in his own right. Indeed, Shapoorji's wealth is estimated close to $ 14 billion and before becoming chairman of Tata Sons Cyrus was managing it quite well.
Things might go hard for him in short term with power struggles with Tatas and re - establishing position at his father's firm, but in the past 4 years, he has shown his mettle.
The clear loser is the Tata Group. How can anyone now expect good candidates to apply for the Chairman post, when on past two occasions, they just carried out whims of Tata Trusts? At best they can expect a cherry picked sycophant to head the company. The manner in which the public image of the group has hurt is even worse than the time when their PR person, Nira Radia spoke on some tapes we all heard and associate with the 2G scam.
They have also taken upon themselves to fight a personal war with their single largest individual investor who owns 18% in the holding company. How can we expect anything constructive now?
Interesting to watch out would be role played by the only other Tata on the table : Noel, who is also related to Cyrus by marriage. Tata Trusts would hope that Mistris would now sell their stakes, but then the shares were bought years ago. They would have made enough money out of their investment through dividends. They could easily hold on to them, and make life difficult for Tata Trusts. Especially if Noel decides to side with them,
Other than that are the millions of shareholders of the individual companies of the group who have been sucker punched into believing that they have invested in a safe and stable company. It is being run by insecure people, moving the company to its slow death.
Nearly any company your pick from the Tata stable, mismanagement from the top is clearly written over them. Like a sarkari company, they all are moving along in a zombie kind of way, knowing that their name would survive them.
Indeed, Ratan Tata started off his own stint at Tata started in the 70s with big duds like NELCO and Empress Mills that failed badly. In recent years, his Nano project was by and large a media hype and nothing else. You declare a car for 1 lakh, sell it for more than that, and then the cars keep burning on roads. They are not sold properly, they have quality issues. Again, the name kept him going. In another company, in another country, perhaps the chairman would have been asked questions. Here, things were coated in PR about affordable cars which no one wanted.
Look at the Indian Hotels - Orient Hotels deals. A disaster. The decision to expand and open hotels around the world, when you barely have cash and demand is shrinking also is questionable.
And then Ratan Tata decided to buy Corus. In the Indian share market history, one of the worst examples of fooling shareholders would be the Corus deal. It drove Tata Steel to an abyss of debt and uncertainty but thankfully the Chairman who pushed it, was a Tata so all was okay.
If one looks at the agreement with Japanese company DoCoMo, who would agree to give a partner a fixed amount of money (huge amount of money) in case things don't work out? Even to the untrained eye, it would seem to be a weird idea.
Even while picking his successor, Ratan Tata took a lot of time. Compare this to L&T and ITC where Chairmen are already grooming their successors and preparing them for the big role. It shows a business maturity and sensibility. And when he did find a successor, he chose the son of the largest individual shareholder of Tata Sons.
Cyrus may have ruffled feathers, especially while cutting down dividends of group companies. But the mess in which they are, does it even make sense to pay heavy dividends?
Like a feudal lord, disturbed with his legacy and shrinking importance, Ratan Tata wrested control from Cyrus in a childish immature manner. It was surprising that several lawyers were handing out media statements on behalf of Tatas, filing caveats and preparing for war, when Cyrus hadn't even responded yet.
I think in this whole turn around, Cyrus Mistry came out to be the winner. Why spend all this time, at Tata Sons when he can work with his father, Shapoorji, a business magnate in his own right. Indeed, Shapoorji's wealth is estimated close to $ 14 billion and before becoming chairman of Tata Sons Cyrus was managing it quite well.
Things might go hard for him in short term with power struggles with Tatas and re - establishing position at his father's firm, but in the past 4 years, he has shown his mettle.
The clear loser is the Tata Group. How can anyone now expect good candidates to apply for the Chairman post, when on past two occasions, they just carried out whims of Tata Trusts? At best they can expect a cherry picked sycophant to head the company. The manner in which the public image of the group has hurt is even worse than the time when their PR person, Nira Radia spoke on some tapes we all heard and associate with the 2G scam.
They have also taken upon themselves to fight a personal war with their single largest individual investor who owns 18% in the holding company. How can we expect anything constructive now?
Interesting to watch out would be role played by the only other Tata on the table : Noel, who is also related to Cyrus by marriage. Tata Trusts would hope that Mistris would now sell their stakes, but then the shares were bought years ago. They would have made enough money out of their investment through dividends. They could easily hold on to them, and make life difficult for Tata Trusts. Especially if Noel decides to side with them,
Other than that are the millions of shareholders of the individual companies of the group who have been sucker punched into believing that they have invested in a safe and stable company. It is being run by insecure people, moving the company to its slow death.
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