Forbes India 15th Anniversary Special

Ratan Tata denies plans to immediately quit as Tata Trusts chairman

The septuagenarian interim chairman of Tata Sons says that he was keen to put in a place a succession process that would allow him to leave and a new chairman to come in his place "at the right time"

Published: Dec 16, 2016 03:17:39 PM IST
Updated: Dec 16, 2016 03:27:41 PM IST

Ratan Tata denies plans to immediately quit as Tata Trusts chairman
Ratan Tata, interim chairman of Tata Sons
Danish Siddiqui / Reuters

Ratan Tata, the septuagenarian interim chairman of Tata Sons, clarified on Friday that he doesn’t plan to step down from his position as chairman of Tata Trusts immediately. Tata Trusts is a clutch of philanthropic bodies that collectively own 66 percent of Tata Sons, the flagship holding company of the $103 billion-conglomerate.

A news report appearing in The Times of India on Friday, which quoted former Tata Sons director and a current trustee of the Tata Trusts, RK Krishna Kumar, suggested that Ratan Tata, 79, may be looking to step down from the Trusts, since an external consultant had been hired to advise them on the selection process for the next chairman. The Tata Trusts comprises the Sir Dorabji Tata Trust and the Sir Ratan Tata Trust and their allied trusts. Their main source of income is dividend earned on their shareholding in Tata Sons. In turn, Tata Sons derives dividends from the various group operating companies of the Tata Group, which has interests ranging from salt to software and automobiles, where Tata Sons is the major promoter shareholder.

“Further to news reports that have appeared in the media today, Mr. Ratan Tata, interim chairman, clarified that there are no plans for his stepping down from the chairmanship of the The Tata Trusts at this point in time,” a statement issued by the group said.

Ratan Tata, who took over the reins of the Tata Group from JRD Tata in 1991, was appointed chairman of the Tata Trusts in 1993, upon the latter’s demise. Traditionally, the chairman of Tata Sons and Tata Trusts has been the same individual, along with other common personnel manning both entities, as well as the group operating companies. This was a deliberate strategy to ensure that the interests of the trusts, Tata Sons and operating companies were aligned and the entire ecosystem functioned as cohesively.

For the first time in 2012, after Cyrus Mistry, 50, scion of the Shapporji Pallonji Group – which owns 18.4 percent of Tata Sons – was selected as Ratan Tata’s successor as chairman of the Tata Group, this chain was broken. While Mistry functioned as chairman of Tata Sons and the group operating companies, he wasn’t chairman of Tata Trusts, a post that Ratan Tata continues to hold.

Since October 24, when Mistry was summarily dismissed as Tata Sons chairman and a power struggle broke out at the 149-year-old conglomerate, the Tata camp has alleged that Mistry took actions that deliberately undermined the importance of Tata Trusts and sought to dismantle the conglomerate structure that Ratan Tata had put in place over the two decades that he served as chairman. On the other hand, the Mistry camp has alleged that the Tata Trusts were exercising undue influence over the functioning of Tata Sons, demanding business information directly from the operating companies and had hamstrung Mistry’s ability to discharge his duties as chairman.

“Mr. Tata also emphasized that the Trusts were undertaking many initiatives that had national impact and he is also looking forward to continuing his involvement with these initiatives in the Trusts. He was however keen that a process should be in place for a smooth succession at an appropriate time,” the Tata Sons statement said. 

In the same news report that appeared on Friday, R Venkataramanan, managing trustee of Tata Trusts was quoted as saying that he too was likely to quit the Trusts in the event of Ratan Tata demitting office.