Mistry accuses Ratan Tata of making questionable investment decisions

Tata Sons decided to exit the company at a commercial loss of Rs 1,150 crore.

By: ENS Economic Bureau | Mumbai | Updated: November 16, 2016 8:11 am
cyrus mistry, ratan tata, tata mistry, cyrus mistry news, tata sons, tata group, tata sons cyrus mistry Ousted Tata Sons chairman Cyrus Mistry. (File)

Cyrus Mistry, the ousted chairman of Tata Sons, on Tuesday accused Ratan Tata of making questionable investment decisions, using Tata Sons to bear his expenses and allowing directors to draw additional parallel commission from group companies. On the other hand, between FY11 to FY15, Tata Sons networth, after considering impairments increased from Rs 26,000 crore to Rs 42,000 crore, significantly strengthening the ability to absorb future shocks, Mistry said in a statement.

He said the impairments and write downs at Tata Sons were due to legacy issues, largely relating to Tata Teleservices. “There were also other investments of questionable nature such as Nagarjuna refineries (Rs 400 crore) and SASOL JV. One investment in Piaggio Aero, a company in the aerospace sector with a friend of Tata, was especially distressing,” he said.

Tata Sons decided to exit the company at a commercial loss of Rs 1,150 crore.

This was after the efforts of Bharat Vasani and Farokh Subedar who managed to recover Rs 1,500 crore, overcoming the objections of Ratan Tata who, in contrast, favoured increasing investments in that company. Today, the company is, for all practical purposes, nearly bankrupt, he said.

“The Tata Sons full-page advertisement of 10th November fails to acknowledge that Tata Sons was also bearing the entire office costs of the Chairman Emeritus Ratan Tata. This figure was about Rs 30 crore in 2015. A significant amount of which was for the use of corporate jets. This dual structure and attendant costs did not exist earlier,” Mistry’s statement said. When contacted, a Tata Sons official said it would issue a clarification on Wednesday.

According to Mistry, another significant difference was due to the cessation of services by Nira Radia (Vaishnavi Communication) who was being paid approximately Rs 40 crore per year. “She had been replaced by Arun Nanda (Rediffusion Edelman) who had been brought in by Ratan Tata at a cost of Rs 60 crore per year for PR support just prior to Mistry taking charge. It is worth noting that a part of this PR infrastructure was also provided to the Tata Trusts, while paid for by Tata Sons,” Mistry said in a statement.

Referring to the period when Ratan Tata was heading the group, Mistry said, “In the five years preceding 2012, several group centre (GCC) members held what were deemed “non-executive” roles in Tata Sons. As such, they, including Tata, drew their compensation as commissions from Tata Sons instead of salaries which skews base year comparisons.

“It is also public knowledge that several erstwhile directors of Tata Sons drew additional parallel commissions from operating group companies,” he said.

Mistry said the group centre (GEC), reporting to Mistry, drew remuneration only from Tata Sons.

“No member including Mr. Mistry took any commissions from any of the operating group companies. This arrangement was a cleaner and more transparent system to ensure that those involved in running the group were remunerated only by the group’s core investment company and not by the operating companies,” he said.

On allegations that impairments indicate an inability to turn around inherited hotspots, the statement said, “Mistry did not approach any of the businesses with a view to do a quick cleansing so that he could immediately demonstrate decent results going forward.”

“The efforts of Tata Sons, under his leadership has always been to look at strategy, structure and leadership changes to drive operational improvements before examining mergers, exits or shutdowns. All the decisions taken in this regard were in keeping with the Tata values and with the full consent of the board,” he said.

The way forward on this front was documented in the board meeting minutes as well as the 2025 Group Strategy Document, which was presented to the Tata Sons at board meetings held as early as June 2015 then in, December 2015, and further iterated in June 2016, he said.

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  1. S
    Satendra kumar
    Nov 16, 2016 at 1:45 am
    Whatever the question is the audit of the accounts should be corrected at least making some money dividend for the shareholders.Everyone wants to gain from business investment either buying shares or wagering.Both system makes a worthy livelihood.God bless all.
  2. P
    Nov 16, 2016 at 5:40 pm
    Mistry appointed the directors.lt;br/gt;Look at each one individually and carefully and decide if they can be lt;br/gt;truly independent running or family members running competing businesses.lt;br/gt;In some cases beneficiaries of Mistry construction company. lt;br/gt;No one believed at the time of his appointment that he really just wantedlt;br/gt;to restructure, takeover and cash in but it is clear now that it the case.lt;br/gt;Mistry needs to go and certainly GOAIR Wadia must go as well at minimum.
  3. V
    Nov 16, 2016 at 5:11 am
    Everybody can make errors of judgement including Mr.Ratan Tata. But it was up to Mr.Mistry to salvage the situation with tact ,foresight and diplomacy. If we dissect the conflict and reach the root cause of this rift , we will find that the seed must have been planted as an ego clash between the players. Mr. Mistry should have seen it coming and taken remedial actions to bring the relationships among the board members under an even keel. This would have negated the need for the acrimonious situation.I am sure both Mr.Mistry and Mr. Tata would have handled the situation differently in hind sight.
  4. R
    Nov 16, 2016 at 5:32 am
    It is easy to say that someone should have recovered the losses. If tact, diplomacy and foresight and "remedial actions" are so effective in recovering losses, then, there would be no bankruptcy in the world! It is easy to blame others using empty words!!
  5. R
    Nov 16, 2016 at 4:28 am
    The huge losses being incurred by Tata Group are the result of commercially disastrous decisions taken by Ratan Tata. Instead of trying to blame Mistry, Ratan should take responsibility and try to salvage the once mighty and most dignified business conglomerate. Ratan will lose whatever respect he has if he continues trying to blame other people!
  6. C
    Nov 16, 2016 at 1:13 am
    Whatever the merits of the case, it appears that Mistry fell afoul of Mr. Ratan TATA, the scion of the company. He should have understood clearly that TATA was more than a Public Company. It embodies the TATA values and with that, the wishes and idiosyncracies of its controlling family. Trying to operate it as a Public company in the manner of a Western Multi-national was a huge miscalculation on the part of Mr. Mistry.lt;br/gt;lt;br/gt;All said and done, TATA is not a rapacious Multi-national, hiring and firing at will. It has a long term vision, and is prepared to shoulder short term losses for long term gain. The Piaggio investment should be viewed in this light. Mr. Mistry disagreed with this vision, and the TATA's had no choice but to fire him.
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