Tata Forces India Inc. to Pick Sides at $100-Billion Empire

(Bloomberg) -- The brawl atop India’s largest conglomerate isn’t just splitting the $100-billion Tata Group, it’s also forcing the nation’s business community to pick sides.

That’s because many of India’s industry captains are board members at Tata’s dozens of units. They include the heads of the nation’s oldest conglomerate -- the Wadia Group -- top mortgage provider Housing Development Finance Corporation Ltd. and even the dean of Harvard Business School. Given the inter-linkages in the nation’s corporate sector, the repercussions of this fight may be felt for years.

At the heart of the tussle is the October ouster of Cyrus Mistry as chairman of group holding company Tata Sons Ltd. by his 78-year-old predecessor Ratan Tata. Ever since then, both sides have traded a relentless string of accusations, with the animosity exacerbated by Mistry’s efforts to remain chairman of key listed companies such as Jaguar Land Rover-owner Tata Motors Ltd.

“We definitely have a significant issue at hand, which is increasingly threatening to escalate beyond conceivable proportions,” said Monish Chatrath, a managing partner at MGC & KNAV Global Risk Advisory. “While a certain degree of constructive tension at the board level is healthy and should be encouraged, it is critical to identify signs of conflicts that have the potential to intensify in magnitude and to nip them in the bud.”

In the latest escalation, longtime Tata ally-turned-foe Nusli Wadia -- whose group traces its roots back to 1736 and built the ship on which the American national anthem was composed -- has threatened legal action after Tata Sons took steps to oust him from the boards of various group units. He was among directors that supported Mistry staying on as chairman of Tata Chemicals Ltd.

Intensifying the divide, Tata Sons wrote on Nov. 24 to Wadia that it does not need to provide a reason in seeking his removal as an independent director at a group company, according to a letter seen by Bloomberg.

Mistry is backed by his father, who is India’s fourth-richest man, and the family holds 18.5 percent of Tata Sons. The ousted Tata chief has also gained support from HDFC Chairman Deepak Parekh during the board meeting of the Tata hotels unit that runs the Pierre in New York, according to people familiar with the matter.

Big Loss

Mistry’s “attempts to turn around and discontinue some loss-making businesses of the Tata group should have been applauded,” said Serum Institute of India Ltd. Chief Executive Officer Adar Poonawalla. “It is a loss for the Tatas for having lost such a person of integrity and competence.”

In Tata’s corner are the likes of Harvard’s Nitin Nohria, TVS Group Chairman Venu Srinivasan, Piramal Enterprises Chairman Ajay Piramal and Bain Capital India Managing Director Amit Chandra, all of whom voted in favor of Mistry’s ouster as Tata Sons chairman, according to people familiar with the boardroom coup.

The feud is likely to escalate next month, when Tata units will begin holding extraordinary general meetings to vote on the removal of Mistry from the boards of individual group units such as Tata Consultancy Services Ltd., Tata Chemicals and Tata Power Ltd.

--With assistance from Hannah Dormido Yue Qiu and Ari Altstedter To contact the reporters on this story: P R Sanjai in Mumbai at psanjai@bloomberg.net, George Smith Alexander in Mumbai at galexander11@bloomberg.net. To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net, Ben Scent at bscent@bloomberg.net, Candice Zachariahs, Timothy Sifert