November 24, 2011

Four things you need to know about Ratan Tata’s successor, Cyrus Mistry

First, a short background about the man whose appointment caught several observers by surprise. Cyrus Mistry is the younger son of Pallonji Mistry, whose construction company Shapoorji Pallonji & Co is the biggest shareholder of Tata Sons, with a stake of about 18 percent.

Mistry is also the managing director of Shapoorji Pallonji, a position he is expected to relinquish soon to avoid any conflict of interest in his new role as deputy chairman of the Tata group.

At 43, Mistry will be younger than Ratan Tata when he took charge of the Tata group in 1991. Mint noted that “his appointment will be part of a larger generational shift in the Tata group, after leadership changes in many of the operating companies”.

According to a Forbes blog, “Cyrus Mistry’s ascension to the top job will provide his family its first opportunity to exercise management control since his grandfather acquired shares in Tata Sons in the 1930s”. His father Pallonji has so far been a passive investor although he sat on the board of Tata Sons until 2006 when he retired and ceded the spot to Cyrus, it added.

Second, reactions to his appointment have ranged from a wholehearted thumbs-up to caution. That’s not surprising, given that he Mistry will soon lead a globalised, multi-billion-dollar conglomerate. After all, he will step into the shoes of a man who practically transformed the Tata group from an Indian company to a globally respected conglomerate. Does he have what it takes to carry on the legacy? The verdict is still not out on that.

“He has phenomenally big shoes to fill,” U R Bhat, managing director of Dalton Capital Advisors India, told Bloomberg. “He’s sort of an enigma. We don’t know whether he has the right credentials.”

In contrast, other experts like Samir Arora welcomed the news. “The markets will like the decision,” the founder of Singapore-based hedge fund Helios Capital Management told the news agency. “It’s great to have an insider who know the group and has tracked it for some years. It will put to rest the uncertainty.”

Third, very, very little is known about Mistry. The Times of India said that until yesterday evening, there was no Wikipedia entry on Cyrus Pallonji Mistry. But as soon as news started filtering through about his appointment, a page was suddenly created about him. In two hours, there were more than 35 additions, with users adding different bits of information, the newspaper said. Indeed, soon after the news broke, Ratan Tata and Cyrus Mistry both started trending on Twitter as well.
In a phone interview to Bloomberg, Parmeshwar Godrej, a board member of Godrej Properties and wife of Adi Godrej, gave her approval of the decision, adding that she had known Mistry since he was a baby. “The whole family is very shy and reserved. I’m sure he will do a great job,” she said.

Fourth, Mistry’s appointment comes at a time when some of the group’s main companies are facing tough operating environments. According to H P Ranina, a corporate tax lawyer who spoke to The Wall Street Journal, Mistry’s key target will be to turn around the group’s international steel business and consolidate all the other businesses.

There will also be questions about his management style. As a quick edit in Mint asks, will it be a loose federation in the JRD Tata style or more centralised in the Ratan Tata style? Guess we’ll just have to wait and watch.

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