Cyrus Mistry's exit: Clues that help understand his ouster

Here are some clues that help in understanding about what could have transpired leading to his ouster

Monday’s move by the Tata Group removing its chairman Cyrus Mistry has come as a shock for many. Here are some events, pertaining to key companies in the group, which occurred during Mistry’s stint. These provide some clues and understanding about what could have transpired leading to his ouster.

TATA STEEL

Tata Steel's India operations are among the lowest cost producers of steel globally. In 2007, under the leadership of Ratan Tata, it bought UK-based Corus in a multi-billion deal (over 6 billion British pounds) that was largely funded by debt. Its fortunes took turn for the worse following the global financial crisis in 2008 — in four of the last seven fiscal years, the company has reported a loss at the consolidated level.

In September 2013, T V Narendran appointed MD-Designate, India and South East Asia & Koushik Chatterjee appointed Group Executive Director (Finance and Corporate).

A governance structure was put in place from November 1, 2013 whereby Narendran, Karl Koehler (MD & CEO, Tata Steel Europe) and Koushik Chatterjee would report to the chairman and the board of Tata Steel.

In February 2016, Koushik Chatterjee given additional charge of Europe.

Major decisions taken by the team: In 2015, Tata Steel signed a MoU for sale of long products Europe business in the UK to Greybull, which was finally completed towards the end of May 2016. But before the completion of the sale, Tata Steel decided to explore all options for the UK business including sale. Seven bidders were shortlisted. In July, however, the sale was put on hold, on Brexit concerns.

TATA MOTORS

Tata Motors is the biggest contributor to the Tata Group in terms of revenue. It, however, continues to struggle in the domestic passenger vehicle market. Led by Ratan Tata, Tata Motors acquired Jaguar Land Rover (JLR) in 2008 for $2.3 billion from Ford Motor Company. JLR has been the key driving force for Tata Motors and its shareholders in recent years when domestic business came under pressure.

In June 2013, Tata Motors launched HORIZONEXT, a customer-focused strategy for the passenger vehicle business. Unveils eight refreshed products.

In January 2014, Tata Motors launched a refreshed Nano, the Nano Twist; on 26th of the same month, Karl Slym, MD of the company passes away.

In September, Tata Motors roped in Mayank Pareek (Maruti’s COO) and made him president of its Passenger Vehicle business; Compact sedan Zest was also launched.

In January 2015, the company launches a hatchback, Bolt.

In May, Nano GenX launched with automatic variants.

In January 2016, Guenter Butschek joins Tata Motors as MD and chief executive from Airbus. Company gets a head after two years.

April: A new hatchback, Tiago, launched (posts sales of 25,000 units till September).

Numbers under pressure

Nano domestic sales are down 60 per cent in H1 of FY17 to 4,459 units. Nano was a pet project of Ratan Tata .

Sales of Zest and Bold have been flat in H1 of FY17.

Indigo volumes too have been flat, Indica sales are down 35 per cent (both now cater primarily) to taxi segment.

JLR has reported decline in pre-tax profits in June quarter due to a devaluation of the Pound following the Brexit vote.

INDIAN HOTELS

Indian Hotels Company (IHCL), which runs hotels under brands like Taj, Vivanta and Ginger, has seen various ups and downs over last four years. The company sold its stake in some properties, it incurred losses in the last four fiscals (FY13-FY16) and saw a series of top level exits.

In July 2014, IHCL sold the loss-making Blue Sydney in Australia for $30 million. 

In August, Raymond Bickson, MD and chief executive, who was hired by Ratan Tata in 2003, quits.

Rakesh Sarna, appointed as MD & CEO of Indian Hotels (IHCL), from 1st September, 2014.

In March 2015, Deepa Misra Harris, senior vice-president, global sales & marketing quits after a 28 year stint.

The same month, ED for hotel operations Abhijit Mukherji, a 31-year veteran of the group also quit.

In February 2016, the hotels major announced exit from a Gateway property it managed in Jaisalmer; IHCL also sold 1.24 per cent stake in Belmond (formerly Orient Express Hotels) for $11.96 million (Rs 81.3 crore); it had bought 10% stake in this NYSE listed company in 2007 for nearly Rs 850 crore. 

In July, IHCL sold another 5.1 per cent stake in Belmond for $49.57 million (Rs 337 crore); it also sold Taj Boston, one of its three US-based properties, for $125 million (Rs 839 crore) to AS Holding LLC.

In August, Mistry calls online room aggregator, OYO a threat; Anil P Goel, ED and CFO quit four days after his reappointment.

TATA POWER

Tata Power has stood out in the Indian power sector. However, it has faced trouble following losses at its 4,000MW Mundra power plant consequent to the changes in laws in Indonesia, a country where it bought stakes in mining companies with an aim to source coal for the Mundra power project. With global coal prices falling, the value of these stakes in Indonesia mines also took some hit while leverage has remained elevated.

In January 2014, Tata Power had announced it would sell its stake in Arutmin back to local Bakrie Group for $500 million. 

In July 2014, it informed the stock exchanges it had signed an option agreement to sell five per cent stake in Kaltim mines for $250 million to Bakrie Group. It held 30 per cent stake in Kaltim mines. Both transactions have not closed, as coal prices fell to record lows.

Analysts recently said although the drop in coal price has helped Tata Power reduce losses at its 4,000-megawatt (mw) Mundra power project, which is fuelled by imported coal, the fall in prices have hit the valuation of its Indonesian coal mining companies. Most of the coal mines of top Indian companies are either making losses or are on the verge of closure.

In June 2016, Tata Power announced the acquisition of Welspun Renewables Energy's 1,140 Mw - solar (990 Mw) and wind (150 Mw) - power generation assets for Rs 9,250 crore, which evoked mixed reactions. Some analysts observed that the company had not adequately factored in the possibility of low plant load factor, high operation and maintenance costs and higher interest cost. They were also concerned about the fact that a large part of Welspun's solar portfolio being contracted at high tariffs (levelised tariff of about Rs 8 a unit) for 25 years, which may not be sustainable.

In June, rating agency Moody's had also said that there would be significant increase in Tata Power's debt burden due to the transaction, and had lowered the company's rating 'negative' from 'stable'. Market analysts had also highlighted the risk to Tata Power's balance sheet, which was already leveraged.

In September 2016, media reports suggested that attempts to sell stake in Indonesian mines have apparently hit valuation hurdle. Global investment banking firm Jefferies had estimated that the combined valuation of Tata Power’s stake in the two firms is down to $990 million, compared to $2 billion when a deal for partial stake sale was signed in 2014. The cash flow from the sale of the projects was to help reduce Tata Power’s consolidated debt that touched Rs 40,120 crore as of March this year.