Sunday / October 21.
HomeFT SelectTata Steel removes Cyrus Mistry as chairman

Tata Steel removes Cyrus Mistry as chairman

Tata has replaced Cyrus Mistry as chairman of its steel subsidiary, as it seeks to reassert control over its operating companies in the midst of India’s biggest boardroom battle.

In a statement to the Mumbai Stock Exchange, Tata Steel said that “in view of the current situation” its board had voted by a majority to replace Mr Mistry as chairman with immediate effect and elected Mr O P Bhatt, an independent director, to take over.

Separately, local Indian media reported that Tata Sons, the group’s holding company, had also asked shareholders in Indian Hotels (IHCL), which runs the Taj Group, to remove Mr Mistry as a director.

Mr Mistry was sacked as chairman of Tata Sons last month, which the company said was because of “clash of cultures” that led to him lose the backing of Ratan Tata, his predecessor and patriarch of the founding family. However, this only served to escalate power struggles at subsidiaries that Mr Mistry chaired.

Earlier this month, Tata Sons said there had been an “expectation that Mr Mistry would gracefully resign from the boards of other Tata companies on being replaced from the position of the chairman of Tata Sons.” But it added that, instead, Mr Mistry had shown “an absolute disregard of longstanding Tata traditions, values and ethos.”

Its subsidiaries Tata Steel and Tata Motors, owner of Jaguar Land Rover, both called shareholder meetings — at the behest of Tata Sons — to vote on the removal of Mr Mistry from their boards. Tata Sons has a 27 per cent stake in the carmaker according to Bloomberg data.

We [Tata Steel] went through some problems in the last few months but we are now resolving it … to make sure that Tata produce steel here for the next 10 years at least

However, the holding company’s efforts to take over the leadership of the two subsidiaries was dealt a blow last week when directors at Tata Motors backed Mr Cyrus to continue as chairman.

A person close to Mr Mistry said his removal from Tata Steel had taken place via a circular just minutes before a scheduled Tata Steel board meeting. This represented an “unprecedented erosion of core Tata Values, [and] is seriously damaging brand Tata,” the person argued — claiming that the action marked a new low in corporate governance at Tata Group.

News of Mr Mistry’s ousting came just hours after a senior Tata Group official said Tata Steel UK had halted the sale of its specialist steels business and committed itself to continued steelmaking in Britain for “at least” a decade.

In making the pledge, Lord Kumar Bhattacharyya, a senior adviser to Tata’s holding company, eased some of the concerns over the future of British steelmaking and the viability of the Port Talbot plant in South Wales.

Speaking to a group of local business leaders and politicians, including UK business secretary Greg Clark, on Thursday evening, Lord Bhattacharyya said: “We [Tata Steel] went through some problems in the last few months but we are now resolving it and we are working with everybody, with the workers, local authorities and government in order to make sure that Tata produce steel here for the next 10 years at least. We will do that.”

After the speech, Lord Bhattacharyya told the Financial Times, said that the company had halted the sale of the UK specialist steel unit in light of the management disruption. This was subsequently confirmed by two separate people with knowledge of the negotiations.

A sale of the business, which has sales of £275m and employs more than 1,500 people, had been widely expected on Friday, according to two people close to the matter. But one obstacle was that a sale would require clearance from Tata Steel’s board in Mumbai. According to one person, the sale process has been halted — though not necessarily cancelled — while Tata’s management decide what strategy to pursue.

Tata Steel UK said the sale process was “still ongoing”.

Via FT