Ratan Tata is adding a new security feature to Jaguar—not the car, but the Jaguar Land Rover brand.
On the face of it, the change he’s pushing for at Tata Group’s holding company is one of those boring shareholder resolutions that would go unremarked upon in an ordinary, closely held firm. But Tata Sons Ltd isn’t a regular company. The nerve centre of the $105 billion group that encompasses, among other units, the marque British carmaker, has been the target of an intense battle for control for almost a year now.
The ultimate prize is Tata Motors Ltd’s Jaguar Land Rover arm, whose continued future ownership is what Ratan Tata, 79, is seeking to secure. If the plan goes through at this week’s shareholder meeting, Tata Sons’ preference shareholders will secure voting rights should the company skip dividends for two consecutive years.
For 49-year-old ousted former chairman Cyrus Mistry, who’s still the second-largest shareholder, this comes as a knockout punch. Things were already looking bad for him on news that Tata Sons was planning to amend its charter and become a private limited firm. The stock sale restrictions that such a company could impose would severely limit Mistry’s options for his 18% stake.
But this other move with preference shares would hobble him entirely, leaving Ratan Tata, who engineered a boardroom coup against Mistry last October, free to decide the fate of a business empire his family built in the 19th and 20th centuries.
Ratan Tata’s own contribution to that legacy was his 2008 purchase of Jaguar from Ford Motor Co. Without that lucky break, and steady cash flows from the group’s software business, the empire would be wilting under the debt from another of his acquisitions, that of Corus Group Plc.’s British Steel assets.
While the fortunes of a cyclical metals business will ebb and flow, the bleeding that shows no sign of stopping is in Tata Teleservices Ltd. The mobile unit is getting butchered by price competition from rival Reliance Jio, backed by Mukesh Ambani, India’s richest man. Shuttering Teleservices is the only option, though that would mean billions of dollars in asset write-offs. Two years of missed dividends at Tata Sons suddenly becomes a real possibility.
When that happens, Ratan Tata and his close aides who own the bulk of the preference shares will have total control. Mistry, who has very few, will see his voting power diluted, leaving zero chance of an alignment with Tata Trusts to take over the group when Ratan Tata isn’t any longer at the helm of the charities that control two-thirds of Tata Sons.
The Trusts own no preference shares, so their clout will also be eroded. That would at least temporarily end the group’s unique position in Indian corporate history in which successive generations of Tata family members were viewed as custodians of society’s assets rather than billionaires maximizing personal wealth.
All that’s for the long run, though. Two years of missed dividends are yet to happen, and maybe they don’t even need to. If Mistry can no longer hope to get in the driver’s seat at Jaguar one day, he may not want to hang around. His family, which first picked up shares in the group in the 1930s, has had a fantastic run. It may be time to put that wealth to work. Just not at Tata Sons. Bloomberg Gadfly