TCS, Tatas’ jewel in crown, likely to vote out Cyrus Mistry as director

The board of Tata Consultancy Services (TCS) is likely to vote out ousted group chairman Cyrus Mistry as director on Tuesday, a crucial leadership battle at India’s largest software company at a time of restrictive business rules in its big western markets.

Mistry was removed as chairman of Tata Sons, the group’s holding company, in October and patriarch Ratan Tata has returned to the helm temporarily. A very public power struggle has since ensued between Tata Sons and Mistry.

Tuesday’s extraordinary general meeting at TCS is part of efforts by Tata Sons to drive Mistry out of the boards of Tata companies where he still sits as director. Sources said a majority of TCS board members favour the principal shareholders, the Tata Sons.

Read: Full text: Nusli Wadia’s letter to Tata Steel shareholders

A majority endorsement of the resolution is vital for the Tatas as it establishes clear control over a group jewel, which along with Tata Motors, accounts for 90% of the group’s profits.

A win at TCS is also vital for Ratan Tata as it will send a strong signal to investors and other stakeholders the world over about stability of the leadership at the software behemoth. Analysts say this is crucial at a time when US President-elect Donald Trump has hinted at tightening visa norms which could impact TCS as a large part of its workforce is located there.

The optimism on TCS vote was also reflected on the exchanges on Monday with the stock rising 0.58% up at Rs 2,206 on a day when the broader BSE index fell 0.8% on fears that US would tighten visa norms.

The BSE’s September 2016 data showed the promoter group, which includes Tata Sons and other Tata companies, own 73.33% in TCS. Ahead of a board meeting on November 17, there were widespread rumors that the Tata group wanted to increase stake in TCS and also nip any possible effort by Mistry to exert any control.

“Just before the TCS board meet, senior executives at Bombay House were of the view that Mistry who has been contesting his ouster, would prefer to increase his control as he was also the chairman,” said a senior group official, using the popular name of the conglomerate’s headquarters in Mumbai.

Read: Cyrus Mistry’s presence a disruptive influence: Ratan Tata

“This was also in line with the charges that Tatas subsequently announced saying that Mistry has been steadily trying to separate Tata Sons’ control over key group companies such as TCS.”

The TCS board then decided to nominate group veteran Ishaat Husain as interim chairman of the company, replacing Mistry. The company also decided at a board meeting on Nov 17, to convene an EGM to vote on removing Mistry as director.

Shareholder advisory firms, which have been active in the dispute over leadership at Tata Sons, have recommended voting for the resolution to replace Mistry as it would ensure minimum disruption that is vital to extending the profitability and corporate leadership of TCS.