Nine-Page Letter is Half Truth: Mistry on Tata Sons’ Explanation

Tata Sons questions Cyrus Mistry’s performance as chairman over the past four years.

The group alleged that Mistry is using legacy issues as an excuse to justify his lack of performance. (Photo Courtesy: BloombergQuint)

Cyrus Mistry has issued a statement challenging the claims made in Tata Sons’ nine-page long statement justifying the decision to sack him.

Mistry said that Tata Sons issued a statement full of “unsubstantiated claims, half truths.”

According to the statement, Tata Sons felt that Mistry had underperformed in the role of chairman and was using the excuse of legacy issues to justify his performance.

Contending the claim, Mistry said:

To allege “ulterior motive” of taking over control of cost... is not in keeping with Tata Sons’ standards. The Tata Sons statement reflects desperation. The statement admits receiving “emails and calls from many across the globe since the Board decided to change the Chairman.”

Tata Sons says that the group’s performance should be viewed after removing the contribution of Tata Consultancy Services Ltd (TCS) and Jaguar Land Rover (JLR), since Mistry had little involvement in the performance of those companies.

Dividends received from all the other 40 companies (many non-dividend paying) has continuously declined from Rs1,000 crores in 2012-13 to Rs 780 crores in 2015- 16 but the latter figure includes additional interim dividend of Rs 100 crores which would have been normally received in 2016-17 (due to budgetary changes). This surely reflects the decline in the total profits of those operating companies from which dividends are paid, during the last four years.  

Tata Sons Statement

The group went on to allege that Mistry is using legacy issues as an excuse to justify his lack of performance. In a letter written to the board of Tata Sons after his removal, Mistry had highlighted the legacy issues, such as high group debt, that he had to deal with during his tenure.

Tata Sons refutes this and says that Mistry was well aware of these issues when he took over.

After four years of full-time involvement and executive authority, we continue to be told how these ‘legacy’ problem areas are a major drag on Mr. Mistry’s otherwise good performance. How many more years would we be told this same story?

Tata Sons Statement 

Commenting on the group’s finances, Tata Sons, in its letter, says that group debt has only risen during Mistry’s tenure. In addition, planned divestments have not taken place.

Group indebtedness has increased by Rs 69,877 crore to Rs 2,25,740 crore over the last four years. Despite huge investments by companies, the returns are not visible in increased profits, though, in all fairness, some major growth projects like the new steel plant at Kalinganagar will show results only in coming years. 

Tata Sons Statement

Concerns At Tata Steel

Tata Sons raised concerns about the manner in which Tata Steel’s Europe business is being handled. Mistry has been attempting to divest assets in UK and Europe to stop the losses being incurred by the group on account of weakness in those business. While Mistry has blamed the poor performance of those assets on weakness in the global economy and the commodity cycle, Tata Sons refutes this.

(Photo Courtesy: BloombergQuint)

Support From Indian Hotels’ Independent Directors to Mistry

In its letter, Tata Sons has questioned the manner in which Indian Hotels Company Ltd’s independent directors came out in support of Mistry. Following a board meeting of the company last week, the independent directors issued a statement saying they have full faith in Mistry.

(Photo Courtesy: BloombergQuint)

Performance Of Tata Motors

Tata Sons also expressed concern on the domestic performance of Tata Motors Ltd’s business.

According to the letter, there has been a “perilous drop” in market share in both passenger cars and commercial vehicles over the past three years. This, however, is being masked by reporting consolidated results, said Tata Sons.

Mistry, on his part, has questioned various decisions taken at Tata Motors during Ratan Tata’s tenure. In particular, he claimed that there was no roadmap to profitability of the Nano project. The project is being kept alive due to emotional reasons and because it was dear to Ratan Tata, Mistry had alleged.

(Photo Courtesy: BloombergQuint)

(With inputs from BloombergQuint.)