 "Nusli Wadia, Non-Executive, Independent Director, Tata Motors arrives for Tata Motors' board meeting at Bombay House in Mumbai (Pic: Kamlesh Pednekar)")
Nusli Wadia, an independent director on Tata Chemicals board, has questioned the company’s decision to acquire overseas units and said the merger of its Haldia plant had destroyed shareholder value. In a letter to shareholders before its December 23 extraordinary general meeting, Wadia alleged several corporate governance lapses at Tata Chemicals. Wadia also questioned Tata Chemicals’ decision to hold shares worth Rs 8,500 crore as cross-holdings in other Tata group companies instead of selling them to make itself debt-free. This is the third letter from Wadia’s office to shareholders of a Tata group company.
The earlier letters were sent to shareholders of Tata Steel and Tata Motors.
Tata Sons has sought to remove Wadia from all group companies alleging he worked in concert with ousted group chairman Cyrus Mistry.
“It was brought to the attention of the board of directors of your company at their meeting held on 10 November, 2016, that the managing director of your company had conveyed that in the event the independent directors chose to issue any statement which made a reference to the chairman, the managing director would not permit the company secretary to issue the proposed communication through the office of the company secretary,” Wadia wrote in his letter.
Wadia further alleged Tata Chemicals’ managing director had convened a meeting with the senior management asking them to sign pre-drafted endorsement letters for Tata Sons’ stand on the Mistry issue.
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“Those present were advised that if they did so, their interests would be protected by Tata Sons. Upon enquiring by the board members, the managing director of your company had accepted the same,” Wadia wrote in the letter.
Wadia has also expressed disapproval over Tata Chemicals’ investment decisions in the last two decades.
“I differed strongly in the proposal for the merger of the Haldia plant with the company. I had expressed my views at the board meeting held on 24 January, 2003, as recorded, that the growth foreseen by the merged entity may be only at the initial stages which is likely to become stagnant thereafter,” Wadia wrote in the letter. Tata Chemicals decided to merge Hind Lever Chemicals, the holding company for its Haldia unit, with itself in June 2004.
The letter also questioned former group chairman Ratan Tata’s decision to acquire the Brunner Mond Group, which had a soda ash business operation in the UK, Kenya and the Netherlands.
“I, as well as some other board members, expressed serious apprehensions about the proposal. We had expressed our concerns on the fundamental issues involved in the overall arrangement, the risk involved, and the assumptions and projections made for profitability, and doubted the rate of return as envisaged in the proposal. However, the decision was ultimately taken by consensus. Unfortunately, shortly after the acquisition, the profitability became negative and continued to remain so,” Wadia wrote.
Tata Chemicals through a subsidiary had signed definitive agreements for acquiring a 63.5 per cent stake in the UK-based Brunner Mond Group, for a consideration of about Rs 508 crore in December 2005. With Mistry as group chairman, Tata Chemicals announced in May 2014 mothballing of its Premium Ash Magadi plant in Kenya due to higher energy costs. The move was part of a larger clean-up at Tata Chemicals. It also announced closure of its soda ash and calcium chloride factory in Winnington in the UK for the same reason in October 2013.
The company has maintained it is open to bringing in an investor for its Haldia unit.
Wadia in his letter also alleged Tata Chemicals and other listed Tata companies had cross-holdings in other Tata group companies to maintain voting rights and control with Tata Sons.
“Tata Chemicals has large cross-holdings in various Tata companies, including non-listed companies. The approximate value of the unlisted shares is around Rs 7,200 crore. The current value of the listed shares is in excess of around Rs 1,300 crore, making a total of around Rs 8,500 crore. If these holdings were to be disposed off, your company would be debt-free,” Wadia wrote.
At the group level, the letter alleged, “the figure across all the listed group companies’ holdings in Tata Sons is approximately 14 per cent of its capital, amounting to approximately Rs 70,000 crore, and is being maintained only to shore up the voting rights of the Tata Trusts”.
