Hours after Tata Sons replaced Cyrus Mistry as chairman of Tata Consultancy Services on Thursday, the group accused him of betraying their trust and allegedly desiring to seek control of the main operating firms of Tata Group. Tata Sons released a nine-page statement blaming Mistry for systematically excluding other representatives from the board. In the last four years, it said, Mistry planned and executed his strategy to become the sole representative of the group. “Under Mistry, Group’s over 100-yr-old structure consciously dismantled, firms drifting away from promoters, shareholders,” Tata Sons said. “In hindsight, the trust reposed by Tata Sons in Mr Mistry by appointing him as the Chairman four years ago has been betrayed by his desire to seek to control main operating companies of the Tata group to the exclusion of Tata Sons and other Tata representatives,” the statement read.
Tata Sons also accused Mistry of trying to gain control of the Indian Hotels Co Ltd by using independent directors. Tata Sons holds just 28.01 per cent stake in IHCL, which last week stated that independent directors have backed the Chairman Mistry and his leadership.
Along with countering all allegations made by Mistry in his letter, Tata Sons also said that the dividend from 40-odd Tata Group firms had declined during Mistry’s tenure while expenses had risen. According to news agency PTI, the statement also said, “We now have an unacceptable new structure where the Chairman alone is the only common Director across several companies and this situation could not be allowed to go on.”
Tata Sons also listed Tata Steel Europe, DoCoMo-Tata Tele joint venture and Tata Motors’ Indian operations as “problem companies” where there was no “noticeable improvement in operations”. It also said the situation had worsened with widening losses, increasing debt and declining market share. It also lashed out at Mistry’s handling of the Tata Steel Europe crisis along with the stand-off with Japan’s DoCoMo over the failed telecom joint venture which led to a $1.17 billion penalty for Tatas.
Mistry had in his letter to the Directors warned of Tata Group firms facing Rs 1.18 lakh crore write-offs. Tata Sons said the group’s debt has risen by Rs 69,877 crore to Rs 2,25,740 crore in the last four years and went on to point that the buyer of Tata’s European steel assets had dramatically turned around the company in the very first year.
Earlier today, Tata Sons appointed Ishaat Hussain as chairman of TCS till a new replacement was found. The group convened an extraordinary general meeting (EGM) to remove Mistry as chairman. TCS informed the stock exchange and its shareholders about the development.