MISTRY's MYSTERY

 

As it is rightly said, "Disturbance between family members makes it easier for vultures to take advantage" 

Because of some debates related to position in the company among the early members of the Tata Group, specifically between JRD siblings, it became easier for the SP group members to acquire stakes in the Tata group. It started with Naval selling 4.81% of his personal stake. This act caused angst between Naval and JRD as JRD was serving as Chairman and Naval did not consult him before selling his stake. It was Naval's way of showing that even he has power over the company. Later Darab had fallen out badly with JRD which encouraged him to sell his 6.88% stake to the Mistry's. A rights issue in 1966 brought SP group holdings to 18.40%. In sum, JRD's act of kindness, dividing his share equally among his siblings, seems to have spectacularly backfired. 

The total acquisition cost was over $11 Million and according to 2022 valuations, it accounts for more than $15B. This is through two companies jointly owned by SP group and Cyrus Mistry. Pallonji’s and Mistry’s are siblings. Even adjusted for inflation, SP group investment in Tata group has given them at least a 300-400 (X) return. 

At the age of 73, Sir Ratan Tata made it clear that by the time he turns 75, he would retire. Hence, he asked a board of 5 people, which included Cyrus to look for a chairman. The best alternative was N Chandrasekaran, but Chandra was busy establishing TCS and removing him from that position would have been a disaster. After 18 months of discussion, Cyrus was appointed as deputy chairman of Tata group with various well-defined conditions which also included working under Sir Ratan Tata for 11 months.  

One of the most important conditions in front of Cyrus was to disassociate himself from SP group operations. Owner of SP group is Cyrus's sibling, and they together hold 50% of the company. Cyrus Mistry accepted the condition. It was based on this commitment from Cyrus to Ratan, representing the majority shareholders, the trusts, accepted the written recommendation of the selection committee. 

The first encounter showing Cyrus's motive was highlighted in their 1st meeting. According to the Tata culture, a chairman discusses every single decision with the board and with majority approval, the decision would be made. But what Cyrus did is that he took the decision and started acting on the decision and later asked to board for formal approval. After many such nasty deeds, in 2016, Tata board fired Cyrus from the chairman position and reappointed MR Tata. Immediately after he was thrown out, he submitted a detailed 5page report to the media stating various allegations on the Tata board and group. The letter was so comprehensive and detailed that it hardly seems spontaneous. It is difficult not to say that it had been prepared in advance and tucked away simply waiting for a date to be attached. The letter stated that Tata group has been doing malicious activities via their trusts, that they were covering losses, etc.  Well, he used various insider info shared by Sir Ratan Tata against him as well as against N Soonawala. In July 2018, NCLT cleared off all charges against Tata group and Tata trust levied by Cyrus Mistry and upheld the provisions of article of associations of tata sons and exercise of rights pursuant to such articles by Tata trust. SP group again tried their luck in 2019 May but were unsuccessful. 

 These events plunged the Tata group into a raging controversy based on an intense, well-planned media campaign by Cyrus. One of the most asked questions was the removal of Cyrus to which Tata group said that he disobeyed his promises. The promise is the Tata group's cement. 

Sir Ratan Tata did not give up on Cyrus. He wrote a deep 3-page letter explaining Cyrus that how he is breaking all the promises which he had once committed to keeping. MR Tata also highlighted the fact that Cyrus was directing a lot of business to the SP group, which was again, against the policy. In a 2011 interview, Cyrus was asked whether he would give up his Irish Citizenship once appointed as the chairman of Tata group, as Tata is Indian biggest business house to which he replied, "irrespective of whether he gets this position or not, he has been thinking about giving up the Irish citizenship". Cyrus died as an Irishman. 

Another malicious activity which Cyrus did was, when Tata power acquired Welspun renewable energy for Rs 9249 Cr, he did not even consult the board. Unknowingly, Tata group had raised that money via NCDs (non-convertible debentures), piling their debt to over Rs 15000 Cr. Ratan Tata was very angry at this decision, not only because he ignored the board, but also because Tata Group was going through a rough patch, and it was a bad idea to increase their debt burden.

Well, we can keep talking about Cyrus's illegal activities, but I think you get the hint. What I believe is if God exists, then his left hand is on the earth and the right hand is on the Tata Group. So, never mess with the Tata's. India is a global economic power not because of decisions or policies implemented by the government, it's because of these business houses that raise our national flag high on the global platform. 

It was Cyrus Mistry's sins for which he paid such an expensive price. No one from the Tata House or MR N Chandrashekaran showed up at his funeral. I would like to quote MR Buffett, who says that "make friends with the people who would hide you". Think about that.