The boards of Tata Steel Europe and Tata Sons wanted Cyrus Mistry, former chairman of the holding company of the Tata Group to quickly sell the sagging European operations of Tata Steel even as he wanted to try and turnaround the company to bring down its losses, according to a person familiar with the development.
“Both the board of Tata Steel Europe and the board of Tata Sons wanted him (Cyrus Mistry) to move faster in getting rid of it (Tata Steel’s Europe operations),” said the person on the condition of anonymity.
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“Cyrus always believes that listen, I can get out of it (Tata Steel Europe) but let me see if I can turn it around a little bit so it’s better for the employees, better for everybody . He said if we can get the losses down, if we can get the government to be flexible on the pension plan and we can improve the productivity of the plant then we have a strong footing. The fault of Cyrus was not that he trying to shut it down. The board wanted him to do shut it down faster,” this person who was familiar with the developments of the group said.
A day after his removal as the chairman, Mistry in a scathing email to the board of Tata Sons and trustees of the Tatas on October 25, had named Tata Steel Europe as a legacy hotspot. Mistry said, “I am not sure if the individual board members and trustees truly appreciated the extent of the problems I had inherited.”
“As you are aware from presentations to you in the recent past, if we look at the aggregate data between 2011 and 2015 and limit the analysis largely to the legacy hotspots (Indian Hotels, Tata Motors, Tata Steel Europe, Tata Power Mundra and Tata Teleservices), it will show that the capital employed in those firms has risen from Rs 132,000 crore to Rs 196,000 crore,” he said.
Mistry had also warned that despite putting “Rs 196,000 crore in group firms due to losses, interest and capital expenditure, a realistic assessment of the fair value these businesses could potentially result in a write down of about Rs 118,000 crore”.
“In the face of the above challenges, I had to take many tough decisions with sensitive care to the group’s reputation as well as containing panic amidst internal and external shareholders,” he said in the letter.
On the NTT Docomo fiasco, the person said Mistry was willing to return $1.17 billion to the Japanese firm without violating any norms in India. “We were doing several JVs under discussion with Japan. None of them were going ahead because of this thing. For us the best thing was for them (Docomo) to take the money and go. But we can’t violate the law,” he said.