Mumbai, Oct. 26: Cyrus Mistry, the deposed chairman of the Tata Group, has sought to drill holes in the legacy of Ratan Tata with a litany of charges.
Mistry accused the 78-year-old patriarch of making a series of bad business bets that he refused to fold when they went horribly wrong, leaving his successor to grapple with the prospect of a write-down of Rs 118,000 crore (around $18 billion) on five unprofitable businesses.
Breaking his silence on the dramatic developments at Monday's board meeting of Tata Sons, Mistry said in a five-page letter to the trustees of Tata Trusts that he had been turned into a "lame-duck" chairman after being assured that he would have a free hand to take tough decisions.
"After my appointment, the articles of association were modified, changing the rules of engagement between the Trusts, the board of Tata Sons, the chairman and the operating companies," Mistry said in his letter. "It severely constrained the ability of the group to engineer the necessary turnaround." He did not elaborate on the changes.
The letter said Tata had left him with five "legacy hotspots": Tata Motors' passenger vehicles segment, especially the Nano project, Indian Hotels, Tata Power's Mundra project, Tata Steel Europe and Tata Teleservices which is currently trying to fight off a $1.17-billion arbitral award that partner NTT Docomo recently obtained from a UK court.
The letter attempted to shred the Tata Group's reputation for high ethical standards by suggesting there was a total lack of corporate governance on the board of Tata Sons where directors "failed to discharge the fiduciary duty owed to stakeholders of Tata Sons and of the group companies".
Mistry called the directors representing the Tata Trusts "postmen" and cited an instance where a board meeting had to be stalled for about an hour "in order to obtain instructions from Mr Tata".
Bombay House maintained a dignified silence as the war of words engulfed the $103-billion conglomerate. Mistry spent a few hours in his office at the four-storeyed Tata Group headquarters and fought his way to his car through a scrum of reporters and television camerapersons without saying anything.
In his letter, Mistry said the Nano small car project had consistently lost money and there was "no line of sight to profitability for the Nano". He said a turnaround strategy for Tata Motors - which he claimed had employed aggressive accounting to capitalise substantial proportions of product development expenses - required the shutdown of the Nano.
"Emotional reasons alone have kept us away from this turnaround strategy," said the letter that was emailed to the trustees with the names redacted in the version that circulated in the public domain.
Mistry said the overseas bets of Ratan Tata, with the exception of automaker Jaguar Land Rover and beverage maker Tetley, had left the group with a large debt overhang, adding that as a non-executive director during that time, even he did not have a "clear grasp of the gravity of the issues involved".
The former Tata Group chairman said he had been given a virtual fait accompli when Ratan Tata forced the Tata Sons board to invest in two airlines - AirAsia India and Vistara - far in excess of initial commitments. He also decried attempts to cover up a Rs 22-crore fraudulent transaction "involving non-existent parties in India and Singapore" that was unearthed in a recent forensic investigation. The board, he said, had decided to file a first information report only after an independent director submitted his resignation.
He said the group's Europe steel business faced a potential impairment in excess of $10 billion, stemming largely from the $12-billion acquisition of Corus Steel in the UK in 2007.
Mistry also slammed Indian Hotels, which owns the Taj group of hotels, for its "flawed international strategy" that included a relentless pursuit of European luxury hotel chain Orient Express, which was finally abandoned in 2013 resulting in deep losses.
"Many foreign properties of IHCL and holdings in Orient Hotels have been sold at a loss," Mistry said, adding that the onerous lease terms made it a challenge to exit the New York-based Pierre. He added that the Taj group had paid an inflated amount for the Sea Rock hotel in Mumbai - scarred in the serial blasts of March 1993 and acquired by the Taj group for Rs 680 crore in 2009. Indian Hotels had to write down almost its entire net worth, impairing its ability to pay dividends, the letter said.
Mistry has come under attack from the Tata Trusts for the poor performance of the 85 operating companies in the group that crimped dividend payouts to the 66 per cent owners of Tata Sons.
"Dividends were reduced (example Tata Motors, IHCL) to conserve cash for needed investments in the teeth of shareholder fury," Mistry said while making a defence of his tough decisions.
Mistry has come under fire for his handling of the arbitration suit that NTT Docomo filed against Tata Teleservices. "The telecom business has been continuously haemorrhaging. If we were to exit this business via a fire sale or shut down, the cost would be $4-5 billion. This is in addition to any payout to Docomo of at least a billion-plus dollars."
The sudden outpouring of bile from a usually phlegmatic Mistry was precipitated by Monday's dramatic decision to remove him from the position of chairman which, he said, was "unique in the annals of corporate history" since it did not afford him an opportunity to defend himself.
What he found particularly galling was the fact that the independent directors on the nomination and remuneration committees who had recently lauded and commended his performance had also voted against him.
"I cannot believe that I was removed on grounds of non-performance," he added.
EXPLOSIVE CHARGES
The main allegations in the letter sent by Cyrus Mistry to the Tata trustees
MISTRY’S MISSILES
