Cyrus Mistry Ouster : Faced constant interference by Ratan Tata
Mumbai, Oct 26: Ousted Tata Group Chairman Cyrus Mistry accused directors at India’s largest conglomerate of wrongfully dismissing him and warned that the tea-to-software giant may face 1.18 trillion rupees ($18 billion) in writedowns because of five unprofitable businesses he inherited.
Bloomberg reports that Mistry, who had been Tata’s chairman for almost four years, was abruptly removed from his role on Monday for non performance without the opportunity to defend himself, the executive wrote in an e-mail on Tuesday to the board of group holding company Tata Sons Ltd., a copy of which was obtained by Bloomberg.
Defending his record, Mistry said he inherited a debt-laden enterprise saddled with losses and singled out Indian Hotels Co., Tata Motors Ltd.’s passenger-vehicle operations, Tata Steel Ltd.’s European business, as well as part of the group’s power unit and its telecommunications subsidiary as “legacy hotspots,” according to the e-mail.
Despite plowing 1.96 trillion rupees — more than the net worth of the group — into those units, they still face challenges and realistically assessing their fair value could result in writing down about 1.18 trillion rupees over time, he wrote.
Shares of group companies extended declines in Mumbai, with Tata Steel falling as much as 5.9 percent and Tata Motors down as much as 5.5 percent.
Representatives for Tata Sons and Mistry declined to comment on the letter.
The comments help shed light on the power struggle occurring at the $100 billion conglomerate in the run-up to Mistry’s ouster, which stunned India’s business community.
Mistry had been pushing to transform Tata Group into a more prudent enterprise than the globetrotter that bought Jaguar Land Rover and steelmaker Corus Group Plc under Ratan Tata.From the flop of the world’s cheapest car — the Nano — to an ultra-mega power plant that had regulations changed on it, Mistry said he was trying to turn things around at the group since taking on the chairmanship. But he faced constant interference by his predecessor, Ratan Tata, to the point that he was pushed into becoming a “lame duck” chairman, according to the e-mail.
For example, Mistry signaled that the Nano — developed by Ratan Tata after he saw a family of four on a scooter on a rainy evening — should be scrapped as the project was consistently unprofitable and at its peak lost 10 billion rupees.
“As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down,” Mistry wrote.
“Emotional reasons alone have kept us away from this crucial decision.’On the telecom business, where Tata is currently embroiled in a spat with partner NTT Docomo Inc. over the payment of $1.17 billion for failing to uphold a contract, Mistry blamed his predecessor for striking such a questionable agreement.
He wrote that an exit from the telecom business would cost as much as $5 billion, in addition to the payout to Docomo. Mistry said he had focused on increasing revenue at the telecom unit in the hopes of it being part of industry consolidation.