Mehli Mistry’s exit from Tata Trusts indicates the beginning of the end of a rancid internal feud, which pitched Parsis against Parsis, and Parsis against non-Parsis. But it possibly hints at the beginning of a new one. In both cases, five issues are crucial: Boardroom shenanigans, legal battles, ego clashes, familial thaw, and political interference. Future events within Tata Trusts, and Tata Sons, the holding company of Tata Empire, will change the future of the group. Legal battles will ensue. Owner Noel Tata may become aggressive, get rid of his enemies, and mend ways with extended family. The past events may result in politics influencing Tata’s internal issues.
Let us peek inside the boardrooms. Mehli’s ouster was a result of attempted coups, and counter-coups. Once he, and three supporting trustees took on Noel and loyalists to wrest control over Tata Trusts and, by extension, Tata Sons, and the group, there was no turning back. The extensions of two opposing trustees, Mehli, and Noel’s backer, Venu Srinivasan (of the TVS fame), were hanging in the air. If their reappointments were approved by consensus, they would become trustees-for-life. Venu’s turn came first, and it sailed through, largely because of the role played by Home Minister Amit Shah, and Finance Minister Nirmala Sitharaman.
Mehli suddenly realised the danger. He had supported Venu, but what if Noel and his gang turned against him? Suddenly, Mehli wrote a letter that stated that his approval for Venu was conditional, and applied only if the reappointments of future trustees, i.e., himself, were approved in a consensual manner. A day before Mehli’s fate was decided, there was speculation that he would be left in the lurch. This happened on October 28, his last day. He was unceremoniously ejected out, which reminded most observers of how the late Ratan Tata treated the late Cyrus Mistry, Mehli’s cousin, in another protracted, bitter, and publicly-fought boardroom battle.
Clearly, like Cyrus, Mehli, who supported Ratan during the war with the former, is likely to go to the courts. The legal battles will encompass two issues. In October 2024, after Ratan’s death, when Noel was appointed as the head of the trusts, and became the new heir, the trusts took an important decision. To assuage the feelings of Mehli, and other Parsis, who were unsure about their future, it was decided that future reappointments of the trustees will be consensual, and for life. Mehli was given a surety. Mehli’s side contends that it was also automatic. If it was, one cannot understand why he gave a conditional approval to Venu’s re-election.
Noel’s sudden and aggressive decision to not only take on Mehli, but remove him from the trusts shows that the seemingly-docile, non-violent, and peaceful owner has another side to his personality. The same thing happened with Ratan, when he became the group chairman in the early 1990s. Then, the feudal technocrats, who lorded over group companies, thought that they would make Ratan do what they wished to. Instead, the new heir sacked them. Noel may do the same, especially with the Mehli’s loyalists within the trusts. The event sends a message that one cannot mess around with Noel in future decisions. Or else, the opposition’s fate is destined.
It signals that from now on, Noel, along with Tata Sons’ chairman, N Chandrasekaran, will manage the group as he deems fit. The latter has become a powerful influence for the past few years, ever since Ratan elevated him to send a public message that the head of the trusts, i.e., Ratan, would not directly interfere in affairs of the companies via Tata Sons, whose boss was different. This explains why Noel heads the trusts, but is a director in Tata Sons. The segregation was crucial because of legal issues, and public image. There was a feeling that trusts should not be interested in profits.
With Mehli gone, and if the same happens to his loyalists, Tata Trusts will be free to take two immediate and pressing decisions. The first, which is a smaller one, concerns the appointment of a trustee, apart from Noel, on Tata Sons’ board. This proved to be the breaking point in the Mehli-Noel saga, and now Noel can go ahead with his candidate, whose name was opposed by Mehli. The second issue is almost larger than life. It relates to Tata Sons’ IPO (Initial Public Offering), which the trusts abhor, at least until now. The IPO is mandated by the central bank’s rules, and the deadline is gone.
Tata Trusts rightly feel that an IPO will reduce their power and influence over Tata Sons, and may even impact the inflows of the money to pursue charities. Listing will force regulator’s rules, as also the demands of the new institutional investors. Tata Sons seems cagey, although Chandrasekaran is keen as it will indirectly strengthen his hand against Noel. Institutional investors may prefer a professional, and maintain status quo, rather than allow Noel to do back-seat driving. With Mehli gone, Noel and Chandrasekaran can put more energy in mending ways with Cyrus Mistry’s family. After the Cyrus-Ratan affair, the intertwined families are estranged. Noel, Ratan’s half-brother, is married to Cyrus’ sister, Aloo.
If the Mistry (Cyrus’ side) and Tata (Noel’s side) get together again, the former, who have vociferously argued for IPO, may backtrack. A deal between the two families may persuade the central bank to go slow on its rules, and either postpone the IPO, or let it hang for years without taking any action. At present, this is the best outcome for the families, including the trusts. But Tata Sons and Chandrasekaran need to find options to compensate the Cyrus Mistry family for their minority, but substantial, stake in Tata Sons. This can be done by raising cash by selling a part of Tata Sons’ equity in group firms.
Recently, the parent sold a part of its stake during Tata Capital’s IPO. In addition, the Cyrus Mistry family can be given stakes in Tata group firms, which they can cash later. The Cyrus Mistry family is desperate for money since it needs to pay its debts. The clock is ticking, and the time is running out. Decisions need to be taken within the next few months. The exit of Mehli will make things easier. Even if he goes to the courts, the legal decisions will take years, as was the case with Cyrus. By the time Mehli wins the legal war, if he does, the corporate and boardroom battles will be won by Noel, Chandrasekaran, and Cyrus Mistry family.