Why did Tata Sons remove Cyrus Mistry as the Chairman?

There were no reasons given for the change of leadership of Cyrus Mistry who had been brought in with much fanfare. But it is believed that Tata Sons was unhappy with Mistry's approach of shedding non-profit businesses, including the conglomerate's steel business in Europe, and concentrating only on cash cows.

Mistry, no doubt, had his task cut out. The Tatas are present in about 100 businesses ranging from automobiles to retail to power plants to software. But just two of them have been consistent performers — IT services exporter Tata Consultancy Services (TCS) and Jaguar Land Rover, the marque car company it bought from Ford Motor in 2008.

Several other of its companies are struggling. The domestic automobile business, despite accounting for roughly half of India’s trucks business, has long been under strain. Tata Steel, once the brightest star in the Tata constellation thanks to the $12.5 billion acquisition of Anglo-Dutch competitor Corus in 2007, bore the brunt of a sharp plunge in prices since 2012 abetted by Chinese glut.

The loss-making telecom business has been locked in a bitter and potentially costly battle with erstwhile partner NTT DoCoMo of Japan, which secured a $1.2 billion arbitration award in June 2016. Dozens of consumption-linked businesses such as Titan, Tata Global Beverages, Indian Hotels, Trent, and Rallis India are slightly better off, but their collective operating profit has grown only 4% CAGR in the past five years.

In FY16, nine of the 27 listed companies in the group reported losses and the earnings of seven others dropped. The only bright spot was that Tata Power and Tata Chemicals reported strong earnings growth in FY16 after turning profitable the previous year.

The turnover of India’s largest conglomerate dropped to $103 billion in 2015-2016 from $108 billion the previous year. Net debt rose to $24.5 billion in March 2016 from $23.4 billion a year ago.

Much of Tata’s problems is owing to its elephantine structure. Cross-ownership of companies — Tata Sons owns stakes in businesses like Tata Motors or Tata Steel and these businesses own stakes in each other — has made it difficult for the group to make the most of its potential as a diversified conglomerate.

The operational ethos of the behemoth is actually engrained in silos. "There is an inherent bureaucracy in the system that has gone unchallenged for years," says an insider.