A fierce fight appeared to be brewing for control of the $103-billion Tata group with details of ousted chairman Cyrus Mistry’s email to the Tata Sons board tumbling out on Wednesday.
The email blames decisions -- such as taking the group global by stretching its resources and manufacturing the world’s cheapest car – taken by Mistry’s predecessor Ratan Tata for leaving the group with no choice but to write down $18 billion.
Mistry paid a quiet visit to Bombay House, the group’s headquarters in Mumbai, on Wednesday, avoiding television cameras and reporters waiting outside.
But soon the details of his email began to emerge, which were explosive compared to the guarded statements that followed Mistry’s surprise sacking.
The writedown, said Mistry, would be because of the losses in five companies: Tata Motors, Tata Steel, Indian Hotels, Tata Teleservices and Tata Power.
This prompted the stock exchanges --- BSE and NSE – to ask the five companies about the details of their losses. And, stock markets regulator Sebi began looking for a breach of corporate governance and listing norms.
The email gave the regulator and the exchanges enough cause for concern. Mistry said he inherited a debt-laden enterprise saddled with losses, naming the hotels, vehicles, steel, power, and telecom companies as “legacy hotspots”.
There was also a hint of the personal. Mistry said the Nano project, though deep in losses, has to continue because it supplies parts to an electric car company part owned by Ratan Tata.
“This product (Nano) has consistently lost money, peaking at Rs 1,000 crore. As there is no line of sight to profitability… Any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision,” wrote Mistry.
He was equally scathing about the group’s overseas acquisitions, sparing only Tetley and Jaguar Land Rover. The rest, Mistry said, had left a large debt overhang. “The European steel business faced potential impairments in excess of $10 billion… Many foreign properties of Indian Hotels have been sold at a loss,” he said.
Ratan Tata had acquired the European steel business from Corus Group amid much fanfare. It was the cornerstone of the global edifice that Tata wanted to turn the group into.
If globalisation was Tata’s ambition, Nano was his heart’s desire. The little car had captured the global automobile industry’s imagination from the first time Ratan Tata talked, some 15 years ago, about a car that would sell for $2,000 – R1 lakh at the time.
He took it to fruition in spite of the engineering challenges and took on chief minister Mamata Banerjee to move the project out of West Bengal to Gujarat. But the car’s sales haven’t matched the drama or the anticipation it generated.
Officially, Tata Sons didn’t comment. But its executives said the group would respond to every point in an email that had been drafted and would soon be sent to Mistry.
The group’s lawyer, Abhishek Manu Singhvi, said Mistry’s ouster was a simple case of a board losing confidence in its chairman and that needed no notice.
For full coverage on Cyrus Mistry’s ouster, click here