MUMBAI/NEW DELHI : The spat at the helm of Tata Sons turned uglier on Wednesday with ousted chairman Cyrus Mistry writing to the Board of Directors that he was “shocked” at his removal. The letter took the fight to group patriarch Ratan Tata, highlighting inherited financial challenges, including a potential write down over time of a whopping Rs 1,18,000 crore and interference in operations and ethical issues. “I am writing this letter... to emphasise the total lack of corporate governance,” he said.
Mistry’s five-page letter said the manner in which he was removed was “unique in the annals of corporate history”. He had not wanted the job, Mistry said, but accepted it for the good of the group. According to Mistry, the financial challenges facing him when he took over were primarily due to the foreign acquisition strategy which left a “large debt overhang” and interference from erstwhile chairman Ratan Tata, which had made him a “lame duck” chairman.
“The European steel business faced potential impairments in excess of $10 billion... Many foreign properties of IHCL and holdings in Orient Hotels have been sold at a loss,” he said, listing woes of Tata Motors, Tata Power and Tata Teleservices too.
The telecom business has been haemorrhaging with a potential fire sale likely to cause a loss of as much as $4-5 billion to the firm. “A realistic assessment of fair value of these businesses could potentially result in a write down over time of Rs 1,18,000 crore,” said Mistry.
He reserved his most damning allegations for Tata’s pet project Nano, the aviation business and resultant meddling. There was no line of profitability for Nano and shutting it down was essential for any turnaround of Tata Motors. “Emotional reasons alone kept us away from this decision. Another challenge... is that it would stop the supply of Nano gliders to an entity... in which Mr Tata has a stake,” he shot off.
Mistry’s allegations of other ethical issues are more explosive. Tata’s passion for the aviation sector had seen him present Mistry with a “fait accompli” in the JV with Singapore Airlines, prior to which something similar had happened for the Air Asia partnership.
Ethical concerns were also raised over certain transactions of Air Asia. A probe revealed fraudulent transactions of Rs 22 crore, said Mistry, and an FIR filed only when an independent director resigned.
Mistry also raised the re-drafting of the Articles of Association (AoA) of Tata Sons, after he took over, which reportedly allowed Tata Trusts to nominate, appoint and remove chairpersons. Mistry said it created flux in decision making and some directors turned into “mere postmen”, running to Tata for instructions.
TV reports claimed that Tata Group sources said the AoA allowed Mistry’s ouster and that the letter was “political drama”. Meanwhile, market regulator Sebi and bourses sought clarification on the letter. Tata Power, in a BSE filing, stated that all relevant disclosures have been made and it had no further comments.