Tata Group Chairman Cyrus Mistry speaks to shareholders during the Tata Consultancy Services (TCS) annual general meeting in Mumbai, India June 28, 2013. REUTERS/Vivek Prakash/File Photo
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Tata Group, India’s biggest conglomerate, has removed chairman Cyrus Mistry after a “clash of cultures” saw him lose the backing of Ratan Tata, his predecessor and patriarch of the founding family.

In a statement that sent shockwaves through India’s business circles, the company also said the board was reinstating former chairman Mr Tata as interim chairman.

It said it had already established a committee to identify a long-term successor for Mr Mistry, a process it said would be completed within the next four months. The statement gave no explanation for the removal of Mr Mistry, whose family controls 18 per cent of Tata Sons, the conglomerate’s holding company.

Lord Kumar Bhattacharyya, the UK-based industrialist and a member of the committee set up to find a replacement for Mr Mistry, told the FT the chairman had been replaced as a result of a “lack of performance”.

In the past four years, some investors had grown frustrated with Mr Mistry, whom they accused of ducking tough decisions needed to overhaul the sprawling group.

One person said that Mr Tata had become concerned about an erosion of the conglomerate’s ethical culture and long-term principles under his successor, and that their relations had reached breaking point.

Mr Mistry created a five-person “group executive council” that was younger than the top team during Mr Tata’s tenure, and was seen by some in Mumbai’s business community as lacking the previous team’s expertise.

“The board, on the recommendation of the principal shareholders, decided it was time to consider a change,” said another person close to the group, who confirmed that this was a reference to the Tata Trusts — charitable bodies controlling 66 per cent of Tata Sons’ stock, which are chaired by Mr Tata.

Tata Sons in turn exercises control over the group through large stakes in businesses such as Tata Consultancy Services, Tata Motors and Tata Steel.

The transition may also mean the company is more prepared to invest “whatever it takes” in its Port Talbot steel works in the UK, as well as in carmaker Jaguar Land Rover in the UK, according to one person familiar with the Tatas’ thinking.

“It’s stunning to see a figure of this stature exiting so abruptly,” said Saurabh Mukherjea, head of institutional equities at Ambit Capital. “There is no precedent in Indian corporate life.”

Mr Mistry was only Tata’s sixth chairman since its foundation in 1868, and the first not to be related by blood to its founder Jamshetji Tata — although he is connected to the family through his sister’s marriage.

Moreover, his family has been a major investor in Tata Sons since the 1930s, and its Shapoorji Pallonji Group is currently the biggest shareholder after the Tata Trusts, with a stake of 18 per cent.

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