Mystery of MISTRY Unfolded

History has repeated itself at Tata Industries with the reinstating of Ratan Tata as the interim Chairman of the salt-to-steel conglomerate.

 

But while the media is busy sensationalizing a move that was unthinkable four years ago – removal of the company’s blue-eyed boy, Cyrus Mistry, from office – many are left speculating the reasons behind this decision.

However, to the observant, the exit of Cyrus Mistry was imminent.

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(The Group's website is yet to be updated)

Cyrus, who had outdone Naval Tata in the race to the office of the Chairman, was officially entasked to bring in disruptive measures to realize a dream beyond words – achieve the golden $500 billion mark.

But four years down the line, Four major reasons that have been cited by the media for his exit are:

  1. Performance issues since the Tata Group witnessed a drop in revenues from $108 in 2015 to $103 bn in 2016
  2. He was not seen a visionary
  3. Infamous for selling non-profitable business, and
  4. Did not handle the DocoMo deal well which brought the group disrepute.

But should we blindly take the media for what it says?

The answer is no.

Let us analyse each of the aforementioned points in minute details:

  1. Tata produces mild steel, currently priced at ~2000 Yuan per kg down from 4500Plus Yuan per kg in 2012. However, the Tata Group revenues have stood tall with minor declines as if almost unaffected by the global meltdown.

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How can it be said that there were performance issues when the revenue remained nearly constant when the price of steel nearly halved? Surely this indicates that the production has doubled. The TATA Group has shown healthy performance, considering that TATA Steel accounts for 25% of the Group’s total revenue.

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2. While Ratan Tata was at the helm of things he launched 19 new products per year on an average, whereas Mistry, during his tenure, has launched close to 40 new products a year. The media needs to come up with some good excuse to tag him a non-visionary.

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3. Mistry’s efforts to sell off non-profitable business has drawn slack – but he is not the only corporate leader to do so in difficult times. One of the major British International Bank’s CEO has exited close to 14 countries and 100plus non-profitable business’ to streamline tapering margins. Deutsche Bank and Standard Chartered are not too far behind in this either.

4. In giving up Docomo, TATA said it would honour a put option to buy out the Japanese company’s stake at a pre-determined price. Given the legalities around it, with involvement from the Finance Ministry and RBI, Ratan TATA would also have done the same thing. To say Mistry did not handle the situation well is being arbitrarily harsh on him.

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In conclusion, it is pretty clear that ousting Mistry wasn’t a performance issue it all. It was personal.

Why?

Because he has taken a step which negates Ratan TATA’s will – Sell Corus

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