Mistry exit a setback, Ratan Tata may bring in stability:Experts

In a sudden move on Monday, Tata Sons announced its decision to replace Cyrus Mistry as Chairman of Tata Sons. The company said Ratan Tata will take charge as Interim Chairman for the next four months till the time a successor to Mistry is appointed.Several industry and market experts expect the decision to be a setback for the group's businesses.Larger businesses of Tata Sons will be impacted till the time a permanent chairman is appointed which is about four months from now, said Prakash Diwan of prakashdiwan.in. The move is a clear setback for the group, investors are unlikely to take the news well in the next few weeks, he adds. But Sourav Majumdar, Editor, Forbes India, said the impact may be contained with news that Ratan Tata has taken over. It will assure stability for the group. Majumdar said he feels it was the board's call to replace Cyrus Mistry with Ratan Tata and Mistry himself has not done it voluntarily. This is due to differences in opinions.If this was Cyrus Mistry's decision, it was very unprofessional, said Anil Singvi, Ican Investment Advisors. He should have his position till a successor was found.Such a sudden move is usually unheard of in a big group like the Tatas, said JN Gupta, former ED, Securities And Exchange Board Of India. More explanation is required from Tata Sons to know the triggers behind the move. Any decision, if negative in nature, will have to be explained by the company, he said.The Mistry family holds the largest share in the company. With the departure of Cyrus, this could become another major hurdle for the group, Gupta added.Meanwhile, Mistry will continue to be the Director of Tata Sons. Shapoorji Pallonji has termed his removal as "illegal" and is likely to challenge the decision, according to people privy to the development.Shapoorji Pallonji Group has claimed that that the removal of Mistry is "illegal" and a 15-day notice has to be served, said senior journalist Arun Giri. He added that Tatas took legal opinion former Solicitor General Mohan Parasaran and former Justice RV Raveendran. Shareholder approval is required for removing a director, but in Mistry's case he was Chairman, said corporate lawyer RS Loona. He said the board of directors have the authority to remove a chairman and what remains to be seen is whether Mistry was given a chance to explain his stance.Watch video for more...