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Proxy advisory SES has recommended that minority shareholders of Indian Hotels, part of the Tata group, vote to remove Cyrus Mistry from the company’s board of directors. The company has called for an extraordinary general meeting on December 20.
In its recommendation, Stakeholders Empowerment Services (SES) has said, “SES, in its analysis, has found that the performance of the company has been agnostic to individuals occupying the post of the non-Executive Chairman.
Indian Hotels appears to be a company having matured with well-established processes and systems and a competent work force and management team. Therefore, the removal of Mistry as a director is not likely to impact performance of the company.”
The resolution is part of an ongoing boardroom battle between Tata Sons, and the group’s former chairman Ratan Tata on one hand, and the current Chairman Cyrus Mistry on the other. On October 24, the board of directors of Tata Sons passed a resolution to replace Cyrus Mistry as Executive Chairman of Tata Sons and revoked all his executive powers.
Negative consequencesSES continued in its recommendation saying, “However, as observed in other Tata companies, there is a high probability that continuation of Mistry might lead to a ‘divided board’, which is a value-destroyer for sure. Thus, keeping this in mind the probable negative consequences of Mistry continuing on the board, as compared to no positive impact of his continuance and in the best interest of the future of the company, SES recommends that shareholders should vote for the resolution.” LIC (8.76 per cent), Reliance Capital Trustee Co (5.5 per cent) and Government Pension Fund Global (2.8 per cent) are the largest public shareholders of Indian Hotels. The promoter shareholding stands at 38.65 per cent.
The fight for Indian Hotels has been particularly acrimonious, with Mistry post-ouster saying that the company had a “flawed” legacy strategy internationally. Many foreign properties of IHCL and holdings in Orient Hotels have been sold at a loss while the onerous terms of the lease for Pierre in New York make it a challenge to exit.
Additionally, he said that the Sea Rock property in Mumbai had been bought at a highly inflated price and housed in an off-balance sheet structure.
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