Cyrus Mistry ignored the advice to dilute 5% shares in TCS, reports

Members of the controlling Tata Trust suggested Cyrus Mistry to sell to five percent stake in Tata Consultancy Service (TCS) so as to help recapitalize some of the struggling group companies. This was said to be one of the suggestions among many which were ignored by Mistry.

Such incidents led to trust deficit amongst the two and finally led to his sacking, two people from Tata Group told ET. Trustees felt the time for reaping the cash was right as TCS would find it tough to sustain the hefty dividend payouts going forward. TCS shares hit an all-time high in October 2014, but like other sectoral rivals of late, faced pressures on the back of growth worries.

Tata Sons, at present holds about 74% shares in TCS. At the peak time, five percent stake would have gotten them around $3 billion.

The Tata Group's $25-billion debt has squeezed the liquidity needed to rejig growth for some of the major operating companies.
ET reported Mistry’s supporters, however, feel that Tata Sons under Ratan Tata as a chairman didn’t dilute the TCS stake even as the group struck big leveraged buyouts, which otherwise could have been done with the capital coming from monetising the shares of the country's biggest tech services company .

The holding in TCS, worth about $32 billion, was always considered a lifeline for Tata Sons, but has rarely been used.

Another thing that the Trusts were concerned about was the roadmap Mistry had for the conglomerate heavily relied on TCS growing at 10% annually, which now seems to be impossible as there is too much turbulence in the IT sector.

The group had an idea about it taking potential blows for firing Mistry, byt Ratan Tata said he was ready to take it on his image in the interests of corrective action, according to Bombay House insiders loyal to him. They also told ET, that Mistry along with his team was unfairly targeting a man who had quietly retired and never attended a single Tata Sons board meeting as chairman emeritus.

“The Tata Sons chairmen in the past, despite controlling the Trusts, saw their roles as a job holder , unlike Mistry who behaved like an owner . I think that explains why Mistry has not reconciled to the recent developments. When 70% of the shareholders (66% of Trusts plus certain Tata family holdings) said they have lost trust in the chairman, nothing else matters," one of the senior Tata officials, told ET.

The group executives said the Mistry family had gained ground and their ties with India's largest conglomerate vastly improved under Ratan Tata, which was acknowledged by the patriarch, Pallonji Mistry , who was effusive in his praise of Tata's contribution when he gave up executive functions. " After the latest developments, there's a conscious effort to spin stories that Ratan Tata was against the Mistrys," these executives said.