Mistry indeed followed standards of corporate governance so that it should not create any controversies at a later date
Former chairman of Tata Sons, Cyrus Mistry had asked all the Tata group CEOs in October 2013 to cease all business relations with his father’s Shapoorji Pallonji group in order to avoid any conflict of interest charges against him at a later date.
A source close to the development said, the SP group, which is one of India’s oldest construction companies, lost sizeable business with the Tata group cutting their business relations with them. The SP group is run by Shapoor Mistry, elder brother of Cyrus.
In his communication to the CEOs, Mistry said the Tata group had always prided itself to adhere to the highest standards of corporate governance in India for over a century.
“In adherence to the same philosophy, and to avoid the perception of a potential conflict of interest, I believe that as long as I am the executive chairman, it would be appropriate that the Tata group of companies no longer engage with the Shapoorji Pallonji group for any engineering and construction contracts,” Mistry said.
The current contracts can continue till its expiry, Mistry had said asking his letter to be placed before the respective companies’ board and implemented across group companies.
An email sent to the Tata group and the SP group did not elicit any response.
Analysts said the letter shows Mistry indeed followed standards of corporate governance so that it should not create any controversies at a later date.
The SP group earns $4 billion in revenues each year and Cyrus’s father Pallonji Mistry’s wealth is estimated at $14.5 billion based on his holding in Tata Sons and in his own group.
87-year Pallonji Mistry, who is not keeping good health, has already announced that his wealth will be divided into two equal parts between his two sons.
Mistry, who joined the Tata group in December 2012, was unceremoniously asked to leave as the chairman of Tata Sons on Monday and was replaced by former chairman, Ratan Tata as Interim Chairman. The Tata group had said Mistry was removed for under performance and trust deficit with the Tata Sons board.
But in his letter to the Tata Sons board sent on this Wednesday, Mistry said during his term, the operating cash flows of the group grew at the rate of 31 per cent compounded per annum.
The Tata Group valuation from 2013 to 2016 increased by 14.9 per cent per annum in rupee terms as compared to the BSE Sensex’s annual increase of 10.4 per cent over the same period.
“The Tata Sons networth has increased from approximately Rs 26,000 crore (Rs 260 billion) to Rs 42,000 crore (Rs 420 billion), after considering the impairments. This has significantly strengthened our balance sheet, enhancing our ability to absorb further shocks from restructuring in the companies,” Mistry said.
