It is a pity that Cyrus Mistry, who died in a shocking road accident yesterday (4 September), will be more remembered for his spat with Ratan Tata and his ouster from the chairmanship of Tata Sons in 2016 than his larger contributions to entrepreneurship, including in his own Pallonji Mistry group.
When I got to meet Cyrus Mistry some four years ago, he was a man wounded to the core by the Tata allegations of malfeasance and bad corporate governance.
He was very keen to put the record straight since the Tata job was not something he had sought on his own, but persuaded to take on as a form of contribution to the country’s most respected business group.
He tried hard in courts, but despite some encouraging verdicts at subordinate jurisdictions, he finally lost the battle in the Supreme Court.
As someone who admires both Ratan Tata and Mistry, I believe that this was an entirely avoidable conflict, and one where Tata should share as much of the blame as Mistry.
As someone who represented an important minority shareholder in Tata Sons (the Mistrys owned about 18-and-odd per cent), and with an entrepreneurial track record of his own in the Pallonji Mistry group, it was always going to be a difficult balancing act to pull off.
While there would always be the long shadow or Ratan Tata looming over him, there was also the need to allay the Tata group’s wariness over a minority shareholder’s entry as the group’s chief helmsman.
The only way it could have worked was if Mistry was forever running to Ratan Tata for advice and validation of his business decisions, but as someone with his own sense of business acumen, it would have been demeaning and unacceptable.
After his ouster in October 2016, Mistry got blamed for the weak performance of the Tata group under him when in reality the huge debts had been run up during Ratan Tata’s tenure.
In the first decade of the Noughties, large global purchases were made in Corus Steel and Jaguar Land Rover at extortionate prices, even while the Indian telecom business was under water and the Nano car was about to bomb at the marketplace.
Rescuing the Tatas from debt to deliverance was never going to be a one-shot affair.
As I had noted in an article about Mistry in 2016, just a few weeks before he was ousted in a boardroom coup, he had to deal with some of the legacy decisions of Ratan Tata.
Tata, apart from investing money in the right businesses at the wrong time and wrong price (steel, autos), also exited the wrong businesses at a difficult time earlier:
“In the 1990s, Ratan Tata’s ideas on the group’s consumer businesses led to not one, but two, mistakes. He sold the FMCG company Tomco, when consumer businesses were to come into their own after liberalisation in 1991. And he did not think much of the chances of Titan, which turned out to be a roaring success. In the latter case, luckily Tata did not opt to throttle or sell Titan at birth. He left it to its own devices, and under Xerxes Desai, Titan turned out to be a winner.
Today, the Tatas are spending heavily to get back into FMCG businesses, just when others have already got into the act (ITC, various online companies, and now Reliance). It will be a long haul, to say the least.
On the other hand, Mistry had begun the task of reducing the group’s debts even while increasing its ability to service them.
As he told a group publication in an interview: “Over the last three years, the gross debt across the group has increased by about 2 percent per annum in US dollar terms, while cash and equivalents have grown at over 10 percent, leading to a reduction of 3.3 percent in net debt in the same period.
"As of March 2016, the group had a net debt of about $24.5 billion. Capex has been on average $9 billion in each of the last three years. In the financial year 2016, cash from operations reached $9 billion a year and exceeded the capex.
"At the group level, therefore, the aggregate debt is not something I feel concerned about. In fact, such aggregations at the group level could mislead, as the companies which have high cash generation, capex and debt are not all necessarily the same, and resources of different companies are not fungible with one another, as they are distinct legal entities with different shareholders.”
Put simply, Mistry was stating the obvious: that cash-rich Tata Consultancy Services was the saviour, and hard decisions needed to be taken on the over-indebted loss-makers.
These decisions (exit from telecom services, investments in refurbishing Tata’s domestic car business using expertise from Jaguar Land Rover, and reorganising businesses by focus area) have since been taken under Mistry’s successor, N Chandrasekharan, who had no issues operating under the shadow of Tata.
He has, after all, always been a professional manager and not the owner of a business.
Most important, the improved performance of the Tata group owes much to the gradual uptick in the business cycle, both globally and in India, which did not happen during Mistry’s tenure.
Bad luck was the reason why the latter could not rescue the group earlier, rather than poor leadership, as the Tatas are wont to allege.
One hopes that the Tatas will bury the hatchet and give the man his due: he helmed the group in difficult times, and its revival and rejuvenation today had its origins in Mistry’s tenure.
The man at least deserves this level of acknowledgement.
Mistry was a good man caught in the wrong leadership position at the wrong time.
As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.
Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.
We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.
Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.