Tata, Kumar Mangalam

Aug. 16: Kumar Mangalam Birla today stepped down as a director of Tata Steel, a move that raised speculation whether this signalled the end of the close ties between the Tatas and the Birlas that were forged almost 70 years ago.

The resignation comes barely six months after a very public spat between Ratan Tata, chairman of the Tata group, and Kumar Birla over the management control of Idea Cellular in which both sides held almost equal stakes.

The battle was settled in April when the Aditya Birla group acquired the Tatas’ 48.14 per cent stake in the cellular service provider for Rs 4,406 crore.

The Birlas were quick to quell speculation about the growing frostiness in the relations with the Tatas. Birla sources said Kumar Birla — who had joined the Tata Steel board in 2001 — had onerous responsibilities after being persuaded by grandfather Basant Kumar Birla, 86, to come on board as an additional director in Century Textiles in February.

“He (Kumar Birla) has also resigned from Maruti Udyog where he was a director since March 2003. He has too many commitments,” a Birla group spokesperson said.

But the buzz refused to die down, especially because Kumar Birla had won an extension recently that would have allowed him to stay on as a Tata Steel director till 2008. The Rs 22,000-crore Tata Steel is India’s largest private steelmaker.

Tata patriarch JRD Tata and Kumar’s great grandfather GD Birla were the architects of the famous Bombay Plan in 1944 that spelt out a framework for India’s transition from agrarian feudalism to industrial capitalism with a humane face. About the same time, GD Birla’s Pilani Investments picked up a small stake in Tata Steel purely as an investment.

Pilani Investments, which B.K. Birla and Kumar took control of last year, still holds 45 lakh shares in Tata Steel, or a little less than 1 per cent of the stock.

The relationship between the Tatas and Birlas was further cemented when Ratan Tata invited Kumar to come on board as a Tata Steel director. Naturally, Kumar’s exit from Tata Steel raises more questions than anyone is ever likely to answer.

B.K. Birla said today Pilani Investments would continue to hold shares in Tata Steel. “I am in favour of continuing with our holding in Tata Steel and Kumar also believes that.”

He said Kumar had discussed his decision with him before stepping down from Tata Steel. The grandfather had advised Kumar to stay on as the “Tatas are good people”. But Kumar apparently said he was completely tied up with his businesses and could not find time to attend board meetings. Kumar attended only one of the seven board meetings of Tata Steel in 2005-06.

Last month, Ratan Tata announced that the group would raise its stake in Tata Steel by about 7 per cent through preferential issue of shares to ward off a possible takeover threat.