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Ratan Tata

Here's What Could Have Lead To Mistry Losing the Coveted Position at Tata Group

Ratan Tata to step in as interim chairman for the next four months
Here's What Could Have Lead To Mistry Losing the Coveted Position at Tata Group
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You're reading Entrepreneur India, an international franchise of Entrepreneur Media.

In what comes as a surprising announcement from one of the most powerful industrial scions of the world, Cyrus Mistry has been removed as the Chairman on Tata Sons Ltd and the industrial magnate Ratan Tata himself has decided to step in as interim chairman for four months.

This move comes as a surprise to the industry, who for long had considered Mistry as the torch bearer of the business empire.

Here's why we think led to Mistry losing the coveted role and forced Ratan Tata to get into the leader's shoes yet again!

  • Obsession to let go of low margin businesses : Mistry for long wanted to shutter loss-making and low-margin businesses , including certain sections of the conglomerate's steel business in Europe which has been under stress due to global slowdown and Brexit. Focussing solely on cash making units, was something that was against the core values of the business empire that had previously made landmark acquisitions like Tetley and Jaguar Land Rover.

  • Bitter legal battles: The conglomerate's telecom arm has been battling with legal issues with its Japanese partner NTT DoCoMo. Earlier in June, an international arbitration court has ordered Tata Sons to pay $1.17 billion (nearly Rs 7,956 crore) to NTT DoCoMo for breach of contract on the grounds that the Indian group neither found a buyer nor bought back the Japanese partner's 26% stake in their telecom joint venture Tata Teleservices.

  • Dividend divide : The Tata group, which has always given priority to its employees and shareholders. However, this year under Mistry's helm their shareholders were asked to be patient for higher dividends, as the company was going through a turnaround amidst stringent global situations. In a shareholders meeting that anyone looking for short term gains should opt out of the group, which did not go down well with the Tata Group's loyal shareholders. The turnover of India's largest conglomerate dropped to $103 billion in 2015-2016 from $108 billion the previous year. Net debt rose to $24.5 billion in March 2016 from $23.4 billion a year ago.

Ratan Tata has always moved with times keeping core policies in place. The industry magnate has been an active investor in new-age startups and at the same time kept core businesses intact.

It would be interesting to see how soon the scion would be successful in finding a new heir to his position.

Edition: December 2016

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