With the dispute at the Tata empire now spilling over to the Tata Trusts from Tata Sons, the epic battle in the $103.51 billion empire spread across many continents now shows all signs of escalating to the next level.
Tata Sons is the holding company of all Tata companies and therefore the chairman of Tata Sons seems to be pretty much the boss of the group. It is from this position that Cyrus Mistry was evicted in October around four years after he was appointed. Cyrus had taken over from Ratan Tata, who exited after turning 75. After Cyrus was axed, the public came to realise that 66% of the shares of Tata Sons are held by a motley group of trusts which are called the Tata Trusts. Thus, whoever controls the Tata Trusts controls Tata Sons and, through the latter, the entire conglomerate.
Whereas in the past the chairman of Tata Sons was the chairman of the Tata Trusts, this was not the case during Cyrus’s tenure. While Cyrus was the chairman of Tata Sons, the chairman of the Tata Trusts was Ratan. It is by using this position that Ratan sacked Cyrus.
When J.R.D. Tata was chairman of Tata Sons between 1938-91, he was also chairman of the Tata Trusts. Between 1991-2012, when Ratan was chairman of Tata Sons he was also chairman of the Tata Trusts. Now Cyrus is lobbying that Ratan should step down from the Tata Trusts and this is the latest episode in the new corporate modern age Mahabharata, where it is difficult to figure out who the Pandavas are and who are the Kauravas.
Jamsetji Tata, who laid the foundation for the group and lies buried outside London, must be turning in his grave. The fact is that none of the men fighting for the top honours, have in any way descended from him. Ratan, who is now back as the interim chairman of the group, is the grandson of Hormusji Tata, a master weaver who joined the Ahmedabad Advance Mills in the first decade of the 20th century. Hormusji belonged to the same clan as Jamsetji but was not related by blood. When Hormusji suddenly died in 1908, he left behind his penniless widow and three children. The widow started to do embroidery work even as the sons were put in an orphanage-cum-school for Parsis in Surat.
In 1918, Sir Ratanji Tata, the younger son of Jamsetji died. Jamsetji himself had passed away in 1904. Ratanji had no children and the same was the case for his elder brother, Sir Dorabji Tata. These were the only two sons that Jamsetji had. Navajbai, the wife of Ratanji was pushed at a family meeting to adopt a ‘son’. That’s how Navajbai went to the orphanage and picked up 13-year-old Naval, attracted by his beautiful eyes. Naval was the son of Hormusji and despite his adoption, continued with the old name of Naval Hormusji Tata for life (instead of Naval Ratanji Tata). But having lived his early life in penury and want, Naval somehow lacked the killer spirit and could never push his interest forward. Thus he rose up to the largely titular position of deputy chairman of Tata group.
The man Naval lost to was a competent man: JRD. But JRD was not directly linked with Jamsetji. He was the son of Ratanbhai Dadabhoy Tata, who was a cousin of Dorabji and Ratanji. He used to do his independent business earlier but after the death of Jamsetji, joined the two bothers as his partner. After Dorabji Tata, who was the chairman of Tata Sons, died in 1931, JRD wished to be chairman of Tata Sons. But at 29 he was too young. Moreover Dorabji, in his last days, had differences with JRD. Apparently JRD’s father, Ratanbhai Dadabhoy, who had died earlier, had borrowed money from Dorabji. After his death, Dorabji insisted the money be paid back immediately. So JRD had to sell off his family home to repay his father’s debts. Dorabji also pulled out a will of Jamsetji and insisted that after his death, a nephew of Jamsetji should succeed him at Tata Sons. That’s how Nowroji Saklatvala (son of Jamsetji’s sister) became chairman of Tata Sons. He died after six years in 1938 and JRD now became the chairman of Tata Sons.
JRD had a very long innings but he had no children. That’s how the baton was passed on to Ratan, the son of Naval. Ratan is not married but his father Naval had married twice. Ratan has a half-brother, Noel, who is 59 years old. Since the retirement age for senior levels in the Tatas is 75, Noel can become the chairman of the group and continue for another 16 years. But it seems that Noel, though he is in the race, is not favoured by Ratan. Noel is presently chairman of Tata International, a smaller Tata company that is in retailing and Ratan thinks he has not had such great business exposure.
In the early 1920s, the Tata group was in trouble because of its capital-intensive investments in steel and hydro-electric power. As such, it required capital infusion and a Parsi financier, Framoze Edulji Dinshaw, infused Rs 1 crore into Tata Sons. The Tatas could not pay back the loan so it got converted to equity in Tata Sons. This was equal to 12.5% of the equity of Tata Sons. When Edulji Dinshaw died in 1931, his successors sold off this equity to builder Shapoorji Pallonji Mistry, though the Tatas tried to persuade them to put it in a trust. Shapoorji Pallonji also mopped up shares of Tata Sons from folks like JRD’s brothers and sisters (against JRD’s wishes) to take up the equity he owned to 18.5%. Shapoorji Pallonji came on the board of Tata Sons followed by his son Pallonji Shapoorji Mistry. The representative of this family on the Tata Sons board has been described as a ‘phantom’ whose presence could be felt invisibly, in Bombay House – headquarters of the Tatas – where they would influence policies. In 2006, using this equity power, Cyrus came on to the Tata Sons board after the retirement of his father Pallonji Shapoorji.
Though JRD ultimately chose Ratan as his successor, the choice doesn’t seem to have been easy. This was because Ratan was not seen as a great performer. Nusli Wadia of Bombay Dyeing, and grandson of Mohammed Ali Jinnah, was the godson of the childless JRD Tata, leading to speculation that he would be the successor to the group. Wadia’s family is one of the most prominent Parsi business families of Mumbai and came to prominence even before the Tatas. Russi Mody of the Tata Iron & Steel Company also saw himself as the successor to Ratan.
Ratan’s initial years as Tata Sons chairman were not great, facing as he did, rebellions from satraps in the group. In 1997, Pallonji Shapoorji initiated informal moves to ease out Ratan but nothing happened. Thus it was surprising how Cyrus managed to get appointed as Tata Sons chairman in 2012.
Now as Cyrus fights Ratan, Wadia has joined forces with him in a do or die battle. It will be interesting to see which way Ratan’s neglected step brother Noel will go. He is married to Aloo, the sister of Cyrus. Whatever this promises to be a mega battle and the spirit of Jamsetji wherever he is must be totally flummoxed by what’s happening.