Ratan Tata, patriarch of one of India’s most storied conglomerates, captured in a letter to fellow dynast Pallonji Mistry the bond between their two families, one that has been moulded not only by business but by almost a century of history and even marriage.
“Our common agreement and mutual faith will foster a true and lasting relationship,” Tata wrote in 1991, according to court filings. “Let me reiterate that I will never do anything consciously to hurt you or your family.”
Three decades later, those words read like the early verses of a Shakespearean tragedy after their bond was torn apart by one of the most intensely personal disputes in India’s recent corporate history.
Beginning during British colonial rule, the Mistrys helped the Tatas build their group into independent India's most important conglomerate. The company’s interests span dozens of sectors including tea, airlines and undersea cables, while assets including Jaguar Land Rover and its British steelworks make it the UK’s largest industrial employer.
But the families’ spectacular falling out after Pallonji’s son Cyrus was fired as chair of Tata Sons in 2016, prompted one of the ugliest chapters in the group’s history. A bitter years-long legal battle ended last month when the Supreme Court ruled decisively in favour of the Tatas, rejecting Cyrus’s appeal that his ousting was illegal.
Yet for Tata Group, now comes arguably the hardest part. First, it must broker a deal to buy out the Mistrys’ 18 per cent stake and sever ties. Then, it needs to turn round the fortunes of a conglomerate that has struggled with a convoluted structure, underperforming legacy businesses and its late arrival to growth areas such as India’s booming digital and consumer markets.
“You would not probably look at the Tata Group as a modern conglomerate,” said one person close to the company. “The most important [thing] is to define themselves.”
The Tata and Mistry families hail from India’s Parsi community, followers of Zoroastrianism who arrived on the subcontinent from Persia more than 1,000 years ago. Parsi entrepreneurs including the Tatas thrived during the British Raj in trading opium, textile manufacturing and steelmaking.
The links between the two families began almost 100 years ago. The Shapoorji Pallonji Group, a construction company run by Cyrus’s grandfather, became the Tatas’ favoured contractor, according to the 2019 book Tata vs Mistry by Deepali Gupta. Shapoorji Pallonji snapped up several stakes in Tata Sons in subsequent decades.
Such was the depth of the ties that Cyrus’s sister Aloo married Ratan Tata’s half-brother Noel.
But their kinship soured after Cyrus succeeded Ratan as chair in 2012, a conflict that culminated four years later in his dismissal. Cyrus claimed he was wrongfully sacked for resisting Ratan’s meddling and that the Tata Group oppressed the Mistrys’ rights as minority shareholders.
He also criticised the group’s unusual ownership structure and alleged serious governance failings. Holding company Tata Sons is majority-owned by the Tata Trusts, a collection of charitable bodies that Ratan chairs.
Tata Group, meanwhile, said Cyrus’s dismissal was a consequence of his poor management.
While the Trusts’ philanthropic record has furthered the conglomerate’s reputation as a well-run, ethical group, critics including Cyrus argued that the structure lacked transparency and allowed Ratan and trustees to unduly influence the business.
In its ruling last month, the Supreme Court rejected the Mistrys’ case, comparing Cyrus to “a person who tries to set his own house on fire for not getting what he perceives as legitimately due to him”.
Both sides declined to comment. But after the judgment, Ratan had said he was vindicated following “relentless attacks on my integrity and the ethical conduct of the group”. Tata Sons said it would “continue its efforts towards development of the nation and building the business”.
Cyrus said he was disappointed but would “sleep with a clear conscience”.
Observers, however, said Tata Group did not emerge unscathed from the episode.
“It became a personalised drama. Tata’s reputation was built . . . on an outward image of more professionalised and stable management that did not involve personal conflict,” said Mircea Raianu, a historian at the University of Maryland who has researched the group. “It made people question whether having trusts so closely involved is always a good thing.”
The case also drew attention to Tata’s mixed business record, including the difficult legacy of its acquisitions of the UK’s Corus Steel in 2007 and JLR in 2008. The Mistrys said the Tatas had contributed to “the largest value destruction in Indian corporate history”.
Corus’s steelworks at Port Talbot in Wales, which has failed to break even at the operating level for a decade, has turned into a serious business and political headache. JLR has sought a radical electric overhaul of its business after falling behind other carmakers.
Critics argued that despite its labyrinthine interests, the group also remained unhealthily reliant on Tata Consultancy Services, the IT group that generates much of its profit.
“You have to shut down the non-performing business,” said Nirmalya Kumar, who was head of strategy under Cyrus’s leadership. “You need to find out which businesses can we make a difference in, and get out of the others.”
Natarajan Chandrasekaran, who took over as chair in 2017, has sought to consolidate the group’s structure, revive its international assets and refocus on India’s fast-growing consumer internet market, including with a mooted ecommerce “super app”.
Some analysts, however, are sceptical that the debt-laden group can keep up with deep-pocketed competitors such as US ecommerce group Amazon or Indian billionaire Mukesh Ambani’s Reliance Industries.
Tata Sons “did great things in the past, but when an investor looks at it he’ll look at his returns”, said Girish Kuber, a newspaper editor and author of a book about the Tatas. “This is definitely going to be an issue. Finding a balance between their so-called values and balance sheet will be a real challenge for the group.”
The Mistrys’ Shapoorji Pallonji Group, whose core interests remain in construction and property, faces possibly greater challenges.
It was plunged into crisis when India went into lockdown last year. The group was forced last month to restructure more than Rs100bn ($1.3bn) of debt with creditors through an emergency pandemic relief scheme.
The two sides are expected to negotiate a deal to buy out Shapoorji Pallonji’s stake in Tata Sons, which the Mistrys believe is worth over Rs1.75tn. Tata, however, said the shares were worth less than half of that.
One option proposed by the Mistrys was to swap its stake in the parent company for shares in listed companies, such as TCS. A separate possibility involved bringing in another investor.
But people close to each side questioned whether the years of bad blood would allow them to find a resolution from wildly different starting points. Tata “won”, said one of the people. “Will they be an elegant winner, or a nasty winner?”
Another concern was that relations could break down again, forcing the dispute back into court and the public spotlight.
“Neither side wants to coexist with the other,” another person with knowledge of the discussions said. “Possibly, you’ll end up with litigation on value next. Let’s hope it doesn’t come to that. But if it does, the only winners you’ll end up with are the lawyers.”