In a short statement on Monday Tata group announced that Cyrus Mistry was being replaced as the chairman of Tata Sons by Ratan Tata as an interim chairman. Though no reasons were given for the leadership change, market speculation is that the ongoing difficulties in the telecom and steel businesses may be the cause.
In 2009 Japanese firm NTT DoCoMo purchased a 26.5% stake in Tata Telecom. In 2014 it announced its plan to exit the joint venture and since then the negotiations, especially related to the valuation of the stake (the amount Tata would have to pay to DoCoMo for buying back the stake) have been stuck in national and international arbitration. An arbitration court in London asked Tata to pay $1.7 billion for breach of contract, while the company deposited more than a billion dollars with the Delhi High Court.
Similarly, Tata Steel’s acquisition of Corus has not worked out well. The Indian steel company purchased Corus in 2007 fo $12.5 billion. But it has been struggling for the last four years because of a dip in steel prices.
Earlier this year Tata Steel said that it was looking at options to sell the UK business, due to “global oversupply of steel, significant increase in third country exports into Europe, high manufacturing costs, continued weakness in domestic market demand in steel and a volatile currency.”
An analyst who tracks Indian corporates said on condition of anonymity that it was probably the ongoing issues at these two units of the Tata group that may have led to the replacement of Cyrus Mistry with Ratan Tata.
He further added that Tata Consultancy Services, for long the cash cow and the crown jewel of the Tata empire, could no longer be relied upon to provide the revenues because of the slowdown of the Indian IT industry.
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