Ratan Tata To Stay Longer As Successor Selection May Take Time

Ratan Tata is likely to continue as interim chairman of Tata Sons even beyond the four months time set for the search committee to find a successor to Cyrus Mistry as finding the right candidate may take longer in the current situation.

Since the group’s preferences would now naturally be a candidate who believes in the values that made the group different from its rivals and most preferably from the Tata legacy itself rather than a new-age professional who sticks to ‘profitability’ alone, the selection process is going to be a complex one, says industry experts and a few insiders.

Although there are rumours making rounds about professionals from outside as top contenders for the top job in the $116 billion group, it is very unlikely that the committee will be able to take a quick decision on the key appointment as the group doesn’t want to repeat a replacement episode again, the people in the know said.

Newspaper reports in the last two days suggest that the real reasons behind Mistry replacement were not exactly the ‘performance’ parameters. There could be several factors, including the ideas of Mistry like the pruning the non-profitable especially affecting the projects like Tata-nano and the once-prestigious Corus acquisition and the UK Steel business and many others, which trickled the displeasure within the group that led to the ouster of Mistry. Hence, taking Tata trusts and the key people in the Tata legacy would be the key task for the search committee before the final selection the new candidate.

“By now, it is almost clear that Cyrus Mistry’s focus as the group chairman was mainly driven by the profitability benchmarks and the decisions were made under his leadership mostly on business considerations without being attached to the other side of the values. And, that the legacy group was not fully with that kind of a journey for the group as it will tarnish its value-based image,” said a person close to the group who doesn’t want to be identified.
The ousted chairman Mistry accusing Tata Sons directors of wrongfully dismissing him had in an email to the board on Tuesday warned that the salt- to-software giant may face Rs 1.18 trillion ($18 billion) in writedowns because of five unprofitable businesses he inherited.

Mistry, who took over as chairman of Tata Sons almost four years ago, was abruptly removed from his role on Monday (24 October) allegedly for non performance without the opportunity to defend himself.

Defending his record, Mistry wrote in his email that he inherited a debt-laden enterprise saddled with losses and singled out Tata Motors’ passenger-vehicle operations, Tata Steel Ltd.’s European business, Indian Hotels Co, as well as part of the group’s power unit and its telecommunications subsidiary as ‘legacy hotspots’.
“Despite plowing 1.96 trillion rupees -- more than the net worth of the group -- into those units, they still face challenges and realistically assessing their fair value could result in writing down about 1.18 trillion rupees over time,” he wrote in the email.

"You need someone with not only integrity but a commitment to the values that the group has built in, as its head,” said the same person, who is close to the group, seeking anonymity.