Will withdraw brand rights: Tata warns defiant companies

MUMBAI: Tata Sons, which owns the trademark Tata, would consider withdrawing its usage rights from group companies that are backing ousted chairman Cyrus Mistry. The independent directors at two group companies — Indian Hotels and Tata Chemicals — have backed Mistry's continuation as chairman already.

The threat comes against the backdrop of Tata Sons calling extraordinary meetings of shareholders to drop Mistry from the boards of listed companies. Tata Group insiders have slammed independent directors backing Mistry, stating they haven't fulfilled their fiduciary responsibilities to secure the future of the operating companies.

"The shareholders will have to decide if these companies should remain part of Tata or not, and if they will be as strong under a Mistry pedigree," one of the Tata Trusts members said. The trusts are principal shareholders of Tata Sons having a 66% interest in the holding company of the conglomerate.

Tata Chemicals, which backed Mistry on Thursday, uses the trademark for Tata Salt, among other products. The group companies using the Tata brand pay a maximum of Rs 75 crore to Tata Sons. The brand usage fee was introduced by Ratan Tata in 1996. The Tata brand was valued at $13.7 billion by the UK-based Brand Finance in July this year.

Last week, after the IHCL board backed Mistry, trustees had voiced similar views suggesting that bank guarantees executed in favour of the company could be withdrawn. Most of the struggling, debt-laden Tata companies are heavily dependent on the parent Tata Sons. Any uncertainty in this regard could spike the interest cost for these companies and even force banks to ask for a financing rejig, sources said.