Ratan Tata Has A Child Lock Feature In Mind For Jaguar

© 2017 Bloomberg L.P | Published: September 19, 2017 10:21 IST
Ratan Tata is adding a new security feature to Jaguar -- not the car, but the Jaguar Land Rover brand.

On the face of it, the change he's pushing for at Tata Group's holding company is one of those boring shareholder resolutions that would go unremarked upon in an ordinary, closely held firm. But Tata Sons Ltd. isn't a regular company. The nerve center of the $105 billion group that encompasses, among other units, the marque British carmaker, has been the target of an intense battle for control for almost a year now.

Mistry family stake in Tata Sons

mistry family stake in tata sons bloomberg
The ultimate prize is Tata Motors Ltd.'s Jaguar Land Rover arm, whose continued future ownership is what Ratan Tata, 79, is seeking to secure. If the plan goes through at this week's shareholder meeting, Tata Sons' preference shareholders will secure voting rights should the company skip dividends for two consecutive years.

For 49-year-old ousted former chairman Cyrus Mistry, who's still the second-largest shareholder, this comes as a knockout punch. Things were already looking bad for him on news that Tata Sons was planning to amend its charter and become a private limited firm. The stock sale restrictions that such a company could impose would severely limit Mistry's options for his 18 percent stake.

But this other move with preference shares would hobble him entirely, leaving Ratan Tata, who engineered a boardroom coup against Mistry last October, free to decide the fate of a business empire his family built in the 19th and 20th centuries.

Ratan Tata's own contribution to that legacy was his 2008 purchase of Jaguar from Ford Motor Co. Without that lucky break, and steady cash flows from the group's software business, the empire would be wilting under the debt from another of his acquisitions, that of Corus Group Plc's British Steel assets.

While the fortunes of a cyclical metals business will ebb and flow, the bleeding that shows no sign of stopping is in Tata Teleservices Ltd. The mobile unit is getting butchered by price competition from rival Reliance Jio, backed by Mukesh Ambani, India's richest man. Shuttering Teleservices is the only option, though that would mean billions of dollars in asset write-offs. Two years of missed dividends at Tata Sons suddenly becomes a real possibility.
tata teleservices debt bloomberg
When that happens, Ratan Tata and his close aides who own the bulk of the preference shares will have total control. Mistry, who has very few, will see his voting power diluted, leaving zero chance of an alignment with Tata Trusts to take over the group when Ratan Tata isn't any longer at the helm of the charities that control two-thirds of Tata Sons.

The Trusts own no preference shares, so their clout will also be eroded. That would at least temporarily end the group's unique position in Indian corporate history in which successive generations of Tata family members were viewed as custodians of society's assets rather than billionaires maximizing personal wealth.

All that's for the long run, though. Two years of missed dividends are yet to happen, and maybe they don't even need to. If Mistry can no longer hope to get in the driver's seat at Jaguar one day, he may not want to hang around. His family, which first picked up shares in the group in the 1930s, has had a fantastic run. It may be time to put that wealth to work. Just not at Tata Sons.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

(To contact the author of this story: Andy Mukherjee in Hong Kong at amukherjee@bloomberg.net To contact the editor responsible for this story: Katrina Nicholas at knicholas2@bloomberg.net)

(Andy Mukherjee is a Bloomberg Gadfly columnist covering industrial companies and financial services. He previously was a columnist for Reuters Breakingviews. He has also worked for the Straits Times, ET NOW and Bloomberg News.)

Disclaimer: The opinions expressed within this article are the personal opinions of the author. The facts and opinions appearing in the article do not reflect the views of NDTV and NDTV does not assume any responsibility or liability for the same.

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