Ratan Tata may find it difficult to remove Mistry from Tata Industries

Raghuvir Srinivasan Chennai | Updated on January 27, 2018 Published on October 31, 2016

Cyrus Mistry



Composition of board, shareholding pattern will prove to be hurdles

Cyrus Mistry may have been unseated from the board of Tata Sons Ltd but there is another apex group company where he continues to be Chairman — Tata Industries Ltd (TIL).

TIL is responsible for incubating all new businesses that the group enters into before handing them over to existing group companies or spinning them off as independent entities. Over the years, the company has incubated TCS, the telecom business which was spun off as Tata Teleservices and the auto components business now housed under Tata Autocomp Systems Ltd.

TIL also has two wholly-owned subsidiaries that are into cutting edge aviation, military and homeland security businesses —Tata Advanced Systems Ltd, which has joint ventures with Sikorsky and Boeing for manufacturing critical helicopter components, and Tata Advanced Materials Ltd.

Managing agency

TIL was originally set up by Tata Sons in 1945 as a managing agency but following the abolition of managing agency system in India, it was converted as a vehicle for the group’s entry into new and hi-tech businesses. It is right now managing three digital businesses of which one — Tata Cliq — has gone commercial while the other two into Big Data solutions and digital health platforms are still under incubation.

According to a Tata executive, Tata Sons directly holds less than 50 per cent of TIL but if the holdings of Tata Investment Corporation and Ewart Investments Ltd, an investment vehicle, are considered the stake of Tata Sons will be a “little more than 50 per cent.” The rest of TIL’s equity is held by group companies, according to the official, who did not want to be identified.

The importance of TIL, apart from its position as the group’s incubator for new businesses, is that it holds equity shares in group companies, albeit minor, with the highest being 2.5 per cent in Tata Motors.

TIL’s board, which had six members including Mistry and Nirmalya Kumar, has now dropped to five with the resignation of the latter. Of the remaining four, two — RR Bhinge and KRS Jamwal — are veteran Tata executives affiliated to the Tata Administrative Service.

The other two are independent directors. Ashish Dhawan is founder and board member of Ashoka University, while Ireena Vittal is a former McKinsey partner who is also director in other Tata companies such as Indian Hotels, Tata Global Beverages and Titan Industries.

Any boardroom move to ease out Mistry will thus need the support of at least one independent director. Long-time watchers of the Tata group say that while TIL is close to Ratan Tata’s heart and he would want to see Mistry off its board, the process may not be easy given the composition of the board and the shareholding pattern in TIL.

Published on October 31, 2016

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