Tata Motors Emerges as Key Battle in Biggest Indian Proxy Fight

  • American depositary holders could influence vote at automaker
  • Jaguar Land Rover’s owner to hold shareholder meeting Dec. 22

Tata Motors Shaping Up as Key Battle in Proxy Fight

Tata Motors Ltd., the $22 billion producer of Jaguar sports cars and Land Rover sport utility vehicles, is shaping up as a key battleground in the fight for control of India’s biggest conglomerate. 

Tata Group is facing opposition to its plan to remove Cyrus Mistry from the automaker’s board after Glass Lewis & Co. and Institutional Shareholder Services Inc. recommended investors vote against the move. The two U.S. proxy advisory firms wrote in reports this month the reasons for the Tata Motors chairman’s ouster haven’t been clearly explained. 

Foreign investors holding American depositary receipts have the potential to influence the vote at next week’s extraordinary general meeting, as they control about 18.5 percent of the carmaker’s stock, data compiled by Bloomberg show. Group holding company Tata Sons Ltd. has been arranging conference calls with fund managers to convince them to vote for Mistry’s removal, according to people with knowledge of the matter. 

Six listed Tata Group companies are asking investors this month to pick between Ratan Tata, a scion of the conglomerate’s founding family, and the man he replaced as chairman of the $100 billion business empire. More than 50 percent of Tata Motors investors voting at the shareholder meeting must be in favor for the resolution on Mistry’s removal to pass. 

“Tata Sons appears worried about the Tata Motors EGM vote outcome,” Ramesh Vaidyanathan, managing partner of law firm Advaya Legal in Mumbai, said by phone Wednesday. “They expect the voting to go to the wire and thought it fit to increase their shareholding in Tata Motors by way of abundant caution.”

Withdrawing Support

Tata Sons revealed Dec. 13 it bought an additional 1.7 percent of the carmaker, bolstering its position before the Dec. 22 shareholder meeting. The holding company boosted its stake to show investors it’s serious about ousting Mistry, and it is open to purchasing more Tata Motors stock before the vote, the people with knowledge of the matter said, asking not to be identified because the information is private. 

Voting procedures for some foreign investors could end up benefiting Mistry. Holders of Tata Motors ADRs can tell the depositary bank, which holds the carmaker’s stock on their behalf, on how to vote at the extraordinary general meeting, according to U.S. regulatory filings. If an investor doesn’t provide any instruction, the depositary bank can give Tata Motors the right to designate someone to vote in their stead, the filings show. 

Tata Group is concerned the procedures could mean ADR holders who don’t make a decision will effectively be voting for Mistry to remain as Tata Motors chairman, given Mistry’s support among board members, according to the people with knowledge of the matter. The carmaker’s independent directors, which include outspoken Mistry ally Nusli Wadia, expressed support on Nov. 14 for the decisions taken during Mistry’s tenure as chairman. 

The group has signaled it may pull rights to use the Tata brand name and withdraw financial support for units that fail to oust Mistry as a director. Tata Sons warned Nov. 13 that boards of the conglomerate’s listed companies must ensure their future is protected and pledged to do “whatever is required” to deal with the situation.

Repeat Vote

If Tata Sons loses any of this month’s shareholder votes, it will consider boosting its stake in the relevant listed company and then calling another extraordinary general meeting, one of the people with knowledge of the matter said. Tata Group owned 33 percent of the carmaker as of Sept. 30, including a 27 percent stake held through Tata Sons, exchange filings show.

A spokesman for Tata Motors referred queries to Tata Sons, which said in an e-mailed statement it’s committed to resolving the current situation in a way that protects the interests of all Tata Group stakeholders. A representative for Mistry’s office declined to comment. A spokesman for Citigroup Inc., the depositary bank for Tata Motors’s ADRs, also declined to comment.

Mistry has said he was pushing to transform Tata Group into a more prudent enterprise than the globetrotter that bought Jaguar Land Rover under previous chairman Ratan Tata. The automotive unit has been a particular point of contention, with Mistry supporters claiming the Nano project to produce the world’s cheapest car was a drain on resources. 

“Voting margins could be close in a few companies like Tata Motors,” Mahesh Singhi, managing director of Singhi Advisors Pvt in Mumbai, said by phone Thursday. “Tata Sons will do whatever it takes to protect its interest in Tata Motors, so I believe it should go through smoothly.”

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