NEW DELHI: Shareholders of Indian Hotelswill on Tuesday, vote on a resolution to remove ousted Tata group chairman Cyrus Mistry from its board. Tata Sons, promoter of the Tata group companies, holds 28.01% of the paid-up equity share capital of Indian Hotels, which operates the Taj chain of luxury hotels. Indian Hotels had last month told the Bombay Stock Exchange (BSE) that it has received a requisition from Tata Sons to convene an extraordinary general meeting to remove Mistry from the company’s board.
Last week, it said it has received Mistry`s representation and circulated it among all the company members, ahead of Tuesday’s EGM at Walchand Hirachand Hall in Mumbai. According to information provided to the BSE, the promoter and promoter group companies hold 38.65% stake in Indian Hotels.“They will get a majority to boot Cyrus Mistry out. About 38% is significant and LIC is another key shareholder,“ said an industry insider familiar with the developments. Indian Hotels had been showing signs of a turnaround under managing director Rakesh Sarna while some of the other group companies are still in the red.
“The interesting aspect is why he is getting voted out,“ said Krishnamurthy Subramanian, associate professor at ISB. “It’s an ego clash and not good governance. With 38%, all you need is some majority and that’s “airly possible.By looking at what happened with Nirmalya Kumar, it is clear that all of Mistry’s men would be feeling nervous about their positions.“
In a December 5 letter to the board of directors of Indian Hotels, Mistry had highlighted the issues the company faced. “IHCL was facing several challenges in 2012. Expensive overseas acquisitions, including the Pierre were bleeding and the Sea Rock project had capital blocked and was losing value…there had been almost no investment to support the domestic market which was at a critical juncture, being flooded by MNC competition (with global brands, loyalty programmes and distribution) with very aggressive expansion plans,“ Mistry had said.