"Rebuilding" Tata Trusts

Even as the boardroom battles continue in Tata group companies, significant changes are being effected in Tata Trusts

Published 8 years ago on Nov 22, 2016 4 minutes Read

While the high-profile developments taking place at the Tata group operating companies have hogged the limelight, the goings-on at Tata Trusts, which controls the Tata Group companies through holding company Tata Sons, have gone somewhat unnoticed.

The composition of Tata Trusts has undergone a change in line with their allegiance to the prevailing chairman in the war against Cyrus Mistry. Less than three weeks after the controversial Tata Sons board meeting to sack Mistry, Venu Srinivasan was quietly made a trustee of Sir Dorabji Tata Trust. Of the seven trusts that cumulatively own 65.29% in Tata Sons, it is the single largest shareholder at just under 28%.

Srinivasan, TVS Motors’ chairman, got on to Tata Sons’ board as recently as this August and voted for Mistry’s ouster barely two months later. Having known Ratan Tata for over two decades, his elevation as a trustee to the most prominent trust in the group is being perceived as a reward for his decision to vote against Mistry.

Srinivasan replaced Darius Khambata, a former Additional Solicitor General, at the Sir Dorabji Tata Trust. Khambata quit the trust a day after Mistry was removed. He has had a long connection with the group as legal counsel and represented Tata Sons in the DoCoMo case in both the London Court of International Arbitration and the Delhi High Court.

Japanese telecom giant, DoCoMo’s $2.7 billion investment in Tata Teleservices has been a serious bone of contention between the Mistry and Tata camps. In a letter to the Tata Sons board, Mistry has said that exiting or shutting down the telecom business would cost at least $4-5 billion. Khambata is a trustee of MC Chagla Memorial Trust. Chagla’s son Iqbal Chagla, a well known lawyer, is Mistry’s father-in-law.

Apart from the Sir Dorabji Tata Trust, the second largest shareholder in Tata Sons is Sir Ratan Tata Trust, which holds a 23.56% stake. It is here that Keki Dadiseth, Hindustan Unilever’s former chairman – who backed Mistry at the Indian Hotel’s board meeting along with other independent directors such as HDFC chairman, Deepak Parekh and Godrej Group’s Nadir Godrej – is a trustee.

Given the high level of hostility between the two camps, how long Dadiseth holds on to his position at the Sir Ratan Tata Trust remains to be seen. Ditto is the case with Nasser Munjee, who is a trustee of Sir Ratan Tata Trust. Munjee sits on the boards of Tata Chemicals and Tata Motors. At both the board meetings, he backed Cyrus Mistry, along with other independent directors.

Both Dadiseth and Munjee have had a long association with the Tata group – Dadiseth has been on many Tata company boards – but in the current scheme of things that may not count for much.

Earlier, Bombay Dyeing’s chairman Nusli Wadia’s decision to back Mistry as an independent director on Tata Chemicals’ board went down badly despite his long-standing relationship with the Tatas. Tata Sons has thereafter sought the removal of Wadia from the board of its operating companies.

In addition to Tata Chemicals, Wadia is on the board of Tata Motors and Tata Steel. Interestingly, Munjee also sits on the boards of two Wadia group companies – Britannia and Go Airlines. Similarly, Dadiseth is on the board of Britannia, Piramal Enterprises, Godrej Properties among others.

It’s important to note that Amit Chandra, Bain Capital’s managing director, who was one of the non-executive directors who voted in favour of ousting Mistry has been on the board of Tata Trusts for a while. He came on board as a director in Tata Sons only earlier this year, along with Ajay Piramal and Venu Srinivasan.

Thus, of the three new inductees on the board of Tata Sons who were part of the palace coup, two are already on the board of Tata Trusts; given this trend, Piramal may be the next in line to get inducted in the Trusts.

In the backdrop of this messy battle, those who have stood by Tata during this succession battle or just the old loyalists have all got plum positions. It includes Tata’s former executive assistant, R Venkataramanan and RK Krishna Kumar, who was heading Indian Hotels and Tata Tea. By the looks of it, the trusts will drive the next round.

The control and composition of Tata Trusts assumes heightened importance as it happens to be the single largest shareholder of Tata Sons. It’s but natural that whoever controls Tata Trusts will call the shots at Tata Sons.

Before the appointment of Cyrus Mistry, Ratan Tata was the chairman of both Tata Sons and Tata Trusts. However, after his retirement from Tata Sons, Ratan Tata continued as the chairman of Tata Trusts. It is not clear who will succeed Ratan Tata as chairman of India’s most venerated public charitable trust. That makes the board composition of the Trusts, a matter of great significance.