New Delhi/Mumbai: The surprise removal of Tata Sons' chairman Cyrus Mistry and his advisory team, and the temporary return of Ratan Tata, could distract the salt-to-software conglomerate from ongoing efforts to trim debt and reshape some of its businesses.
"When Mistry was there some actions were being taken at a group level which would have helped reduce the company's cash drain activities," said Daljeet Singh Kohli, research head at broker IndiaNivesh. "There was hope that rational, rather than more emotional decisions would prevail."
Some analysts expect uncertainty at Tata may stall some ongoing initiatives, such as the search for a partner for Tata Steel's struggling UK assets.
Business Focus
Ratan Tata on Tuesday urged those in charge of Tata Group companies to focus on their businesses and shareholder returns, and not be distracted by the board changes.
"The companies must focus on their market position vis-à-vis competition, and not compare themselves to their own past," Tata said, according to a company statement.
Referring to ongoing initiatives, he said Tata would "evaluate and continue to undertake those that are required". Any changes would be discussed with business heads.
"At a business level, life doesn't change for us due to this management re-jig," said a senior banker and frequent investor in Tata group's bonds. "What we need to see is what kind of strategy they will adopt now to revive their weak companies."Swift Removal
Mistry's dismissal as chairman - he remains a board member - stunned even Tata insiders and senior executives, people in the company said.
Tata has disbanded the group executive council - a core advisory team - set up by Mistry, who was trying to shake up the $100 billion company through changes to its management structure and the introduction of new faces at senior levels.
In a sign of the near-150-year-old conglomerate's heft, Prime Minister Narendra Modi was told about the leadership change in a personal letter, according to government sources.Stocks React
Shares in Tata Steel fell 2.5 percent, Tata Power 1.5 percent, TCS 1.2 percent and Tata Motors 1.1 percent. The broad Mumbai market closed down 0.2 percent.
"The reaction in some of the stocks could be termed as a knee-jerk reaction as sentiment takes a hit and an air of uncertainty prevails," said Arun Kejriwal of Kris Research in Mumbai.
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