Brand value took a hit under Mistry, says Tata Sons
Tata Sons Pvt. Ltd said on Thursday that despite claims of good performance, the chairmanship of Cyrus Mistry saw an erosion in brand value and a decline in the financial performance of Tata group companies. The holding parent of Tata group companies said in a court filing that the bulk of operating companies underperformed the benchmark Sensex index, and that Tata Sons did not enter any significant business opportunities during Mistry’s tenure.
“Cyrus Mistry, as executive chairman, was more often than not ‘finger pointing’ and ‘blaming’ the past and failed to recognize that in the case of Tata Operating Companies with varied businesses, it would not be unusual to expect headwinds in some of the businesses,” Tata Sons said in a Supreme Court filing reviewed by Mint.
On the contrary, the approach of the current leadership under the chairmanship of N. Chandrasekaran has been one of transforming the businesses, it said.
Recognizing that there is significant ground to cover, Tata Sons has invested ₹28,500 crore in the operating companies to correct their balance sheets and support growth, the Tata companies’ parent said.
Mistry, through his two investment firms that hold a stake in Tata Sons, is fighting a court battle over his ouster in October 2016 and is seeking proportional board representation as the largest shareholder in the holding company of the group. The legal battle has now been on for three and a half years.
Mistry was sacked citing performance issues by the board of Tata Sons, prompting Mistry investment firms to file a petition alleging mismanagement and oppression of minority shareholders. In December last year, the National Company Law Appellate Tribunal (NCLAT) ruled in favour of Mistry firms, which led to Tata Sons appealing in the Supreme Court.
Quoting Brand Finance, Tata Sons said the value of the “Tata” brand actually declined from approximately $14.8 billion in 2014 to $13.1 billion in 2017 (most of which coincided with Mistry’s tenure).
In commercial vehicles, Tata Motors steadily lost market share from 60% a few years earlier to hit a low of 44% in FY17. Similarly, the domestic personal vehicle business also ceded market share from approximately 12.4% a few years ago to 5% in 2017, said Tata Sons.
Separately, Tata Trusts, which are also a party to the case, said in a rejoinder filed on Thursday that the trusts do not “wield power”; they empower and transform people’s lives.
A spokesperson for the Mistry group did not offer any comments; however, an official on condition of anonymity said, “During Mistry’s tenure, there was a strong focus on improving operational performance. The focus was on rationalizing of commercially non-viable circles//chk// and improving quality of revenue.” Referring to the current leadership, this official added, “In the last three years, Tata Sons invested about Rs67,000 crore in portfolio companies. The value of these investments has already eroded by approximately Rs40,000 crore.”