Battle of the Century Imperils Tatas as Investors Are Tested
Battle of the Century Imperils Tatas as Investors Are Tested
(Bloomberg) -- The biggest proxy fight to rock corporate India looms as six listed Tata Group companies prepare to ask investors to pick between Ratan Tata and the man he replaced as chairman of the nation’s largest conglomerate.
At stake is the ability of companies including Tata Power Co. and Tata Motors Ltd. to use the Tata brand and raise funds with the backing of the group that Ratan Tata took charge of in a coup on Oct. 24. Cyrus Mistry, the ousted executive, has resisted efforts to remove him as chairman of key group companies, prompting the parent to call extraordinary general meetings to force him off the boards all together.
The feud between Tata and Mistry has played out in a series of bitter public accusations and recriminations, with each side blaming the other for missteps at the salt-to-software empire. Some investors have voted with their feet, driving the market value of the group’s listed entities down more than $16 billion. Starting next week, the remaining shareholders will vote on the companies’ leadership.
“When it comes to the big companies and conglomerates of India, the EGM fight by the Tatas is going to be one of the biggest corporate battles of the century,” said Mahendra Patil, managing partner at credit rating advisory firm XMPUS Financial Services LLP. “It would also be a test for brand Tata, as to which way institutional investors tilt,” he said, adding “Mistry is no novice in the corporate or financial world.”
| Companies | EGM Date | Mistry’s Post | Tata Holdings | Foreign Portfolio Investors | Mutual Funds | Insurance Companies |
| Tata Consultancy Services | Dec. 13 | Director | 73% | 17% | 1% | 4.1% |
| Indian Hotels | Dec. 20 | Chairman | 39 | 13 | 13 | 3.5 |
| Tata Steel | Dec. 21 | Director | 31 | 13 | 9 | 19 |
| Tata Motors | Dec. 22 | Chairman | 33 | 26 | 4 | 10 |
| Tata Chemicals | Dec. 23 | Chairman | 31 | 19 | 15 | 13 |
| Tata Power | Dec. 26 | Chairman | 33 | 26 | 3.1 | 21 |
The Tatas are stepping up efforts to ensure shareholders understand why Mistry was ousted.
Citigroup Inc. and JPMorgan Chase & Co. have been appointed to build support among foreign institutional shareholders, according to people with knowledge of the matter who asked not to be identified as they are not authorized to speak to the media. Edelweiss Financial Services Ltd. and ICICI Securities Ltd. are helping with local mutual funds, insurance companies and high net-worth investors, according to the people. The institutions all declined to comment.
Tata Consultancy Services Ltd. Chief Executive Officer Natarajan Chandrasekaran and Chairman Ishaat Hussain met fund managers from BlackRock Inc. and Vanguard Group Inc. in Hong Kong and Singapore in November, the people said. Representatives at holding-company Tata Sons Ltd., Mistry’s office and the asset managers declined to comment.
Life Insurance Corp. of India -- the nation’s largest insurer -- is among the biggest shareholders in the six companies planning EGMs, according to people. Both Ratan Tata and Hussain met senior LIC officials in the final week of October, after Mistry was removed, according to the people. A spokesman for the insurer declined to comment on the matter.
Mistry Website
On their end, Mistry’s camp has set up a website containing a 14-page missive to investors accusing the Tata Group’s biggest shareholders -- charitable trusts started by the founding family -- of undermining governance at the conglomerate and portraying the ousted executive as a defender of independent decision-making.
If Mistry wins the right to remain on any of the boards, holding company Tata Sons plans to revoke permission for that unit to use the group’s brand name and also stop the guarantee which it offers on loans taken by some of these companies, the people said. Tata declined to comment.
To read about Tata Power’s comments on risks to brand use, click here
A change in Tata Sons’ support policy could affect the operating companies’ ratings, according to a Nov. 30 statement from Moody’s Investors Service. Tata Sons may terminate the 1998 pact for use of Tata brand name by Tata Power in case any terms are breached, Tata Power said on Tuesday. Loss of the brand name could have a material impact on its business and finance, Tata Power said.
“Any change in group strategy or in the strategy of the operating companies -- which in our view increases their risk appetite -- could exert pressure on the Tata companies’ ratings,” Kaustubh Chaubal, a Moody’s vice president and senior analyst, said in the statement.
To contact the reporters on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net, P R Sanjai in Mumbai at psanjai@bloomberg.net. To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Young-Sam Cho at ycho2@bloomberg.net, Candice Zachariahs