Mehli Mistry exit: Why is Tata Trusts' apex member on his way out?

The fierce tussle at Tata Trusts, which holds a 51 per cent stake in Tata Sons, on Tuesday has effectively claimed its first casualty—Mehli Mistry, a long-time confidant of the late Ratan Tata.

In a major development at Tata Trusts on Tuesday, chairman Noel Tata, vice chairman Venu Srinivasan, and trustee Vijay Singh declined to approve Mistry's renewal as an apex member of both the Sir Ratan Tata Trust (SRTT), as well as the Sir Dorabji Tata Trust (SDTT)—which together comprise the 51 per cent stake in Tata Sons, local media reports said, citing an ET article.

The vote had effectively divided the two factions, with Darius Khambatta, Pramit Jhaveri, and Jehangir H.C. Jehangir in support of Mistry.

The article added that since Mistry cannot vote for his own renewal, the veto decision has a majority at SDTT. The veto decision is effectively a majority decision at SRTT as well, since Jimmy Tata does not typically participate in Trust deliberations.

Mistry's ouster, which comes nearly a decade after Cyrus Mistry's exit from Tata Trusts in October 2016, follows his conditional approval of Srinivasan's reappointment, which added to the tensions across the Trusts.

THE WEEK ARCHIVES | Read 'Order in the house', THE WEEK's November 6 cover story on the Cyrus Mistry exit

One of the reasons for the existent tensions at Tata Trusts were reportedly because the Mistry camp voted against former defence secretary Vijay Singh’s reappointment as a Tata Sons nominee director.

Perhaps more pressing is the Mistry camp's link with the Shapoorji Pallonji Group (SPG), which holds approximately 18.37 per cent stake in Tata Sons, and has been looking to sell that stake in order to reduce its debts.

The SPG's chance lies in a Reserve Bank of India's (RBI) impending ruling on the future of Tata Trusts' private status as an upper-tier Non-Banking Financial Company (NBFC), the deadline for which passed on September 30.

The RBI had earlier mandated that Tata Trusts—one of the 15 firms it had identified as an upper-tier NBFC—list itself public within three years: a move that is feared to open it up to outside investors, and a potential takeover. While the Trusts seem unanimous on staying private, the SPG seeks a listing, as that would let it sell its stake and exit Tata Trusts.

A source indicated that the Tatas have likely convinced the RBI to let it stay private, and that the overhang was likely to go by the end of the year. The issue is also likely to bring about unanimous support for Noel Tata now.

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