The announcement that Mr Cyrus P. Mistry, scion of the Shapoorji Pallonji Group, will take over from Mr Ratan Tata is being seen by informed Tata watchers as a shift away from professional management to more direct family control – even if the family's name isn't Tata.

At the same, a former senior Tata Group veteran recalled Mr Cyrus Mistry's first reaction after watching a presentation on the Tata Group around 20 years ago. “I didn't know I was so rich,” Mr Mistry is reported to have said, after being told how vast the Group really was – despite his family being the largest single shareholder in the Group's holding company, Tata Sons.

That disarming comment illustrates the huge change in the always understated, but extremely strong connection between the Tatas and the Pallonji Mistry Group – and the extent to which that relationship has changed over the years.

Around the time that a young Mr Cyrus Mistry was getting his first look at what was then his family's collateral interest, Mr Ratan Tata was beginning his process of establishing control over the coffee to cars conglomerate – and the group's powerful and till then largely independent managers of various Tata arms – known in Tata lore as the ‘satraps'.

That was the time that the Shapoorji Pallonji family actively exercised its shareholder power – and firmly backed Mr Ratan Tata in his showdown with the ‘satraps'.

During the late J.R.D. Tata's time, say veteran insiders, the Shapoorji Pallonji Group had maintained a hands-off policy, giving JRD a free hand in running the group's businesses.

Informed sources, speaking on the condition of anonymity, said that there was considerable relief among Group veterans at Mistry's choice. There is a lot of respect for the business acumen of the Shapoorji Pallonji Group, a closely-held family owned and managed business which is probably India's largest privately owned business group today.

Insiders also believe that Mr Mistry may follow tradition in allowing group executives a fair degree of operational freedom – while exercising close control over strategy and key financial decisions.

To an extent, the transition at Tata mimics the change a few years ago at what was then one of the world's largest automotive companies – Ford. While the Ford family owned about 6 per cent of the shares, it controlled about 40 per cent of the voting rights. Although the carmaker switched to professional managers after Henry Ford II's exit, the family stepped back to take over control during a time of deep crisis, when William Clay Ford Jr ousted Jacques Nasser to become CEO in 2001.

There is no similar crisis at Tata right now. But it is a time of great challenge, especially as Europe, where the Group has considerable investments, teeters on the brink of economic chaos.

Related Topics