Cyrus Mistry’s Ouster: Why Did Ratan Tata Write to PM Modi?

Ratan Tata’s letter to the PM was probably a signal to the market that “everything is under control”.

The Narendra Modi government is unwilling to take sides. But it’s keeping a close watch on the ongoing boardroom battle in the Tata Group.

A day after Tata Group Chairman Cyrus Mistry’s ouster, sources in the Prime Minister’s Office (PMO) said, “We generally don’t get such letters [Ratan Tata informing PMO about the change of guards at Tata Sons]... But maybe Ratan Tata felt it was important to inform the PM because they share very good ties.”

“We didn’t expect him to inform us – and there has been no discussion on his letter.”

Also Read: New Chairman Will Be Decided in 4 Months: Tata Pens Letter to Modi

The PMO sources also argue that the letter was perhaps an attempt to send a signal to the market that “everything is under control.”

The timing of the decision, however, has surprised everyone. More so since Tata Group companies were not doing so badly under Mistry on key parameters such as market capitalisation and revenue growth.

What would have gone against Mistry was the fact that other than Tata Consultancy Services (TCS) and Tata Motors (mostly because of the performance of Jaguar and Land Rover), most other companies were making losses, a senior bureaucrat in the Ministry of Corporate Affairs observes.

Mistry in “Course Correction Mode”

“Mistry was on a course correction mode as he was selling companies that were on the verge of collapse. This was hurting the legacy of Ratan Tata. It was also bringing to light bad decisions taken by Cyrus’ predecessor,” the bureaucrat added.

Also Read: This is Why Ratan Had to Say Tata to Cyrus Mistry

Mistry’s attempted restructuring of the Nano project in Gujarat’s Sanand would have raised a few eyebrows. “Nano was a loss-making venture and Mistry wanted to change the business model that would have resulted in job losses in Gujarat, and Ratan Tata was against it,” the bureaucrat reasoned.

The relocation of the Nano project from Singur in West Bengal to Sanand was a much talked-about event. Any retrenchment at the Sanand unit would not have pleased the PM. Hence the pre-emptive attempt by Ratan Tata, top sources in the government say.

While the government is not willing to take sides, the fact that Ratan Tata enjoys good rapport with the PM may have emboldened him to take such a drastic decision to unceremoniously remove Cyrus as the Tata Sons chairman.