In an article headlined simply “Ratantrum”, The Economist has mercilessly dressed down Ratan Tata for his public feud with Cyrus Mistry over the chairmanship of Tata Sons.
The comment article claims that since Mistry, himself an investor in the firm, has support of some operative companies, the struggle for power between Tata and him could be damaging to the company.
“The battle is bad for Tata, rotten for its outside investors who have tens of billions of dollars at risk, and damaging to India,” reads the article.
Tata Breathed Down Mistry’s Neck
While Ratan Tata expanded the firm and successfully acquired companies like Jaguar Land Rover (JLR), he also added companies that have proved detrimental to the firm’s profits, the article observes.
Mistry was handed a $100 billion business in which “60 percent of employed capital makes a return of less than 10 percent”, though he did not do much about it either, according to the report.
A business of that magnitude – from telecom to auto – requires major steps which, in turn, require power. However, while Mistry had the title, the article claims that Ratan Tata could not cede complete control of the firm.
Mr Mistry may have thought he had a free hand. Far from it. Mr Tata was breathing down his neck from the start.The Economist
Since September, the value of Tata’s listed companies has dropped by $17 billion, the report claims.
‘Byzantine’ Structure
The administration of the firm, with its many holdings, boils down to private holding companies. The stakes held by these private holdings ranges from 20 to 75 percent.
Further, the private holdings are in control of “murky and secretive charitable trusts set up in 1919 and 1932”, the report claims.
Four-Point Solution for Ratan Tata?
After bluntly analysing the situation, The Economist provides an equally blunt three-point solution to Tata.
- Claim absolute control
- Get rid of “zombie companies”
- Reform the group’s structure to make it accountable to investors
- Once his company is fixed, leave
If Ratan Tata fails to finish his stint within a span of 12 months, he is headed from glory to disgrace, claims the article.
(Source: The Economist)
(At The Quint, we are answerable only to our audience. Play an active role in shaping our journalism by becoming a member. Because the truth is worth it.)