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Cyrus Mistry fires fresh salvo against Tata management ahead of NCLT verdict

Cyrus Mistry fires fresh salvo against Tata management ahead of NCLT verdict

Cyrus Mistry fires fresh salvo against Tata management ahead of NCLT verdict
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By PTI Jul 9, 2018 1:06:29 PM IST (Updated)

He has questioned the rationale behind some actions like the free sale of its telecom arm to Airtel, massive debt-driven acquisitions by Tata Steel and its unequal tie-up with Thyssenkrupp, and a first-ever dip in TCS profit among others.

Ahead of the NCLT verdict on his

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petitions against the Tata Group later this week and the AGMs,

ousted chairman Cyrus Mistry has fired a fresh salvo at the
management.
He has questioned the rationale behind some actions
like the free sale of its telecom arm to Airtel, massive
debt-driven acquisitions by Tata Steel and its unequal tie-up
with Thyssenkrupp, and a first-ever dip in TCS profit
among others.
In a letter to the directors of Tata Sons, Cyrus
Investments, which is the key investment vehicle of the Mistry
family and the key petitioner in his legal feud with the
Tatas, Mistry has sought accountability and information from
the board of Tata Sons in which his family owns
18.34 percent.
PTI has seen the 8-page letter, titled Tata Group
Strategy/Performance/Governance Issues dated June 30 and
addressed to the entire board of Tata Sons.The office of Mistry did not respond to the calls, while Tata Sons declined to comment.
The Mumbai bench of the NCLT will deliver its verdict
on July 4 on the bitter legal feud that Mistry has been
fighting ever since dismissal as the chairman of the Tats Sons
on October 24, 2016.
The key allegation by Mistry camp is that his removal
as chairman and subsequently as a director of the board Tata
Sons was a result of oppression by the promoters who are in
turn owned by Tata Trusts that owns over 68 percent
in Tata Sons.
Stating that the board is accountable for governance
and performance of the Tata Group as also to the minority
shareholders, the letter states that despite staring at
several burning issues, "Tata Sons is hiding behind the veneer
of media management to present a rosy picture."
Questioning the "free transfer of Tata Teleservices"
to Airtel, the letter says the Tatas did not get any benefit
from the deal despite transferring 40 million customers, a
large swathe of liberalised spectrum and access to Tata Teles
extensive fibre network, while it has immensely benefited
the acquirer.
Terming the deal, which led to an increase in market
capitalisation of Airtel by almost Rs 30,000 crore, as a
"sweetheart deal," Mistry says, "he fails to understand the
logic of offering Bharti Airtel access to these assets
effectively for free."
It can be noted that Tata Tele has been on the
downslide for years and is sitting over Rs 26,000 crore of
debt which has to be cleared before the sale goes through.
Mistry also asked why a successful exit from the
enterprise business has not been pursued, "despite receiving a
$ 1-billion offer from a former senior Tata employee backed
by a private equity firm."
The letter also asks the directors to satisfy
themselves that transactions that Tata Motors has entered into
with Jayem Auto and Ola are at 'arm's length' and 'value
accretive', given that these companies have investments from
Ratan Tata.
He also expressed concerns on the continuing poor
performance of its marque British brand JLR, whose volume
"rose a mere 1.7 per cent" in FY18.
Comparing the massive debt-driven expansion of Tata
Steel to its doomed acquisition of Corus, which later nearly
sunk the parent company, he cautioned against a potential debt
burden arising from the Rs 80,000-crore capex needed for
acquiring Bhushan Steel (Rs 35,000 crore), Bhushan Power &
Steel (Rs 24,000 crore through the NCLT) as well as the Rs
23,000-crore expansion of Kalinganagar project.
"If the commodity cycle and the uptick in steel prices
are to change again, leading to a decline in prices, Tata
Steel will once again stand highly exposed with serious
consequences Tata Sons," warns the letter.
He also held the management accountable for the
deteriorating performance of Tata Steel Europe that
compromised the deal with Thyssenkrupp, which was initially
meant to be an equal JV but finally sealed as 45:55 JV.
He has also vented his concerns over the deteriorating
profit at three of the largest Tata companies, TCS, Tata
Motors and Tata Power.
Noting that for the first time its cash cow TCS saw a
dip in profit in FY18, he warned that the management cannot
pat itself on the back for the record high market
capitalisation that crossed the Rs 7 trillion-mark which
according him is not because of fundamentals but due to the
massive share buyback.
He also came out strongly against the clean-chit given
by the Tata Sons board to R Venkataramanan, its nominee on the
AirAsia India board and the managing trustee of Tata Trusts,
"without conducting any known independent investigation."
This the letter said is "a continuing act of
mismanagement and failure to carry out fiduciary duty" and
termed the board decision to allow Venkataramanan, has brought
reputational risks to Tata Sons and the group to continue in
his position as "unprecedented" as it has "sent a terrible
message to hundreds of thousands of Tata employees".
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