 "Cyrus Mistry and Ratan Tata")
Days after Cyrus Mistry was removed as the chairman of Tata Sons on October 24, and Ratan Tata was reinstated as an interim chairman for four months, a bitter war of words between the two continued over the weekend.
The decision to oust Mistry had been taken in less than half an hour at a full-strength board meeting in Mumbai. And, amid allegations and counter-allegations flying high, the conglomerate continues its struggle to put things back into place for itself.
Sacked unceremoniously, a “shocked” Mistry has levelled a series of allegations against Tata and contended that he was relegated to a “lame duck” chairman and changes in the decision-making process created alternative power centres within the Tata group.
Here is a list of developments that took place over the weekend:
October 28
Tatas seeking a partner
Ratan Tata was reported to be looking for a partner that could buy out the Tata Sons stake held by Mistry’s family. The Tata family trusts reached out to sovereign wealth funds and other long-term investors to gauge their interest in purchasing the Mistry family’s 18 per cent stake if it became available.
The Mistry family, however, does not currently plan to sell its holdings, according to sources.
Welspun deal
The board of Tata Sons Ltd, including nominee directors of Tata Trusts, was kept fully informed about Tata Power’s plan to buy some renewable energy assets from Welspun Energy Ltd, Mistry said on Friday.
The board of Tata Sons Ltd, including nominee directors of Tata Trusts, was kept fully informed about Tata Power’s plan to buy some renewable energy assets from Welspun Energy Ltd, Mistry said on Friday.
It was one of the tipping points that forced Mistry’s ouster over his failure to keep Tata Sons’ board informed about the Welspun deal, sources said.
Mistry said in a statement that on May 31 a note on the deal had been circulated among all board members of Tata Sons (including Ratan Tata), giving them details and asking if they wanted more information. It said that Vijay Singh, who was a nominee of Tata Trusts, replied to this note and “expressed positive appreciation”.
In September, Tata Power completed the acquisition, paying Rs 9,300 crore.
October 29
3 resignations
Three senior group executives at Tata Sons resigned on Saturday, as management woes appeared to deepen at the $100-billion conglomerate following the ouster of Mistry.
Three senior group executives at Tata Sons resigned on Saturday, as management woes appeared to deepen at the $100-billion conglomerate following the ouster of Mistry.
The three executives were members of an executive council disbanded after Tata dismissed Mistry. The council, comprising five senior Tata group executives and Mistry, was tasked with creating long-term value for stakeholders and boosting returns on investment.
Those who quit were group human resources chief NS Rajan, group business development and public affairs head Madhu Kannan, and group strategy executive Nirmalya Kumar.
Loans to Siva Industries
Refuting Mistry’s allegation, Tata Capital Financial Services said secured term loans to Siva Industries and Holdings Ltd and Siva Ventures Ltd, aggregating Rs 200 crore were sanctioned by the investment panel of its board and due processes were followed. Mistry had alleged that the loan had been given on the “strong advice” of an executive trustee.
This loan facility had been sanctioned by the Investment Credit Committee of the Board, Tata Capital said. “Due internal processes as applicable for sanctions of loans of such nature and value were followed. The facility had a security cover significantly in excess of the loans granted and was backed by a personal guarantee of C Sivasankaran. The facility was settled in June 2014 and due disclosures were made in the audited financial statements of the company,” it said.
Unanswered questions
The Tata group’s communication strategy has come under criticism, especially following allegations made by Mistry in confidential letter written to Tata Sons board. Though the Tatas have slammed Mistry for the 'unforgivable' leak and the individual companies have asserted that the financial statements present a true and fair picture, specific allegations are yet to be addressed officially.
The four questions that Tatas need to answer are -- the performance metrics for the Chairperson of Tata Sons; what are the departures from culture and ethos of the group; will Cyrus Mistry continue as Chairpersonin the listed Tata companies and how will the dual power structure work, going forward?
Global investor summit
The Tata group is planning to organise a global investor summit amid rising uncertainty after Mistry made serious allegations over corporate governance and mismanagement at salt-to-steel conglomerate.
More than 150 global and local investors have agreed to participate in the summit, scheduled for mid-November in Mumbai. Tata Group spokesperson Debasis Ray confirmed the development.
Global sovereign wealth funds such as Singapore’s GIC and institutional investors like Fidelity have signed up.
October 30
Fraud allegations
After stock exchanges and the market regulator raised their antenna on Mistry’s allegations against Tata Sons, the Enforcement Directorate (ED) pulled up its socks and decided to probe the fraud allegation. The ED would primarily investigate the Rs 22 crore fraud allegations under Section 3 of the Foreign Exchange Management Act (FEMA), 1999.
Mistry had alleged that "a recent forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent parties in India and Singapore".
Mistry remains adamant
The full-blown war between the Tatas and Mistry is expected to escalate in intensity, with the latter evidently unwilling to step down as chairman of various group companies, including Tata Motors, Tata Steel, TCS and Tata Power.
“Mistry has been asked to step down, but he has shown no inclination to do so,” said a company source close to the Tata group. Mistry, the source added: "Even chaired a board meeting of Tata Global Beverages at Bombay House last week. At a time when he has questioned his dismissal as chairman of Tata Sons, it is unlikely that he will exit from group companies.”
Mistry is chairman of Tata Steel, Tata Motors, TCS, The Indian Hotels Company Ltd, Tata Global Beverages, Tata Chemicals, Tata Industries and Tata Teleservices. According to insiders, if Mistry contests his ouster, his exit from the group companies, too, would get entangled in the legal process. In that case, each company might have to call for an EGM to force him out.
October 31
Aviation business
Rubbishing Mistry’s reservation, the Tata group is confident that Singapore Airlines (SIA) and Air Asia are backed by sound business judgement, despite losing money on them.
Rubbishing Mistry’s reservation, the Tata group is confident that Singapore Airlines (SIA) and Air Asia are backed by sound business judgement, despite losing money on them.
Tata SIA, which runs Vistara Airlines, lost nearly 58 paise for every rupee earned in sales in its first year of operations. The joint venture between Tata Sons and Singapore Airlines posted a net loss of Rs 401 crore on a revenue of Rs 691 crore for the year to March, according to its investor presentation.
Vistara, which started flights in January 2015, has a 2.5 per cent share of the Indian domestic market and has crossed the 3 million passenger mark. It operates over 500 flights a week from 18 domestic airports with a fleet of 13 Airbus A320 planes.
