Cyrus Mistry questions Tata group investments in fresh rebuttal
Ousted chairman Cyrus Mistry rebuts Tata’s charge on growing impairment charges during his tenure, questions compensation of Ratan Tata
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Mumbai: Cyrus Mistry, the ousted chairman of Tata Sons Ltd, on Tuesday questioned the group holding firm’s investments in certain companies, high public relations (PR) costs, the compensation of Ratan Tata and the practice of directors drawing commissions from operating companies.
Mistry’s statement rebutted Tata accusations that expenses and impairment charges had risen during his tenure. He said the allegations were “another brazen attempt to mislead the public and shareholders”.
Rising impairments at group firms stemmed from issues that Mistry inherited when he became chairman in December 2012 and were largely related to Tata Teleservices Ltd, the statement said. It gave examples of “other investments of questionable nature” the group made in at least two firms and a joint venture with a third. Tata Sons decided to exit one of the investments at a commercial loss of Rs1,150 crore, the statement said. Mint is not naming these firms because it wasn’t able to get in touch with them for a response to the allegations.
“These are insinuations. We will put the facts out,” said a Tata Sons spokesperson.
Mistry’s strategy was to drive operational improvements before examining mergers, exits or shutdowns, the statement said. All decisions “were in keeping with the Tata values and with the full consent of the board”, the statement said, answering allegations that rising impairments indicated Mistry’s inability to turn around weak group firms.
Tata Sons and Mistry have traded allegations and counter-allegations since the latter was abruptly ousted as chairman of the group on 24 October, less than four years after he succeeded Ratan Tata. After his removal, Ratan Tata took over as interim chairman.
“It’s imperative that Tatas come out clean as soon as possible to ensure their name is not sullied further,” said J.N. Gupta, managing director and co-founder at Stakeholder Empowerment Services.
Mistry’s statement also said Ratan Tata was partly to blame for rising expenses at Tata Sons. The holding company of the salt-to-software conglomerate bore the entire office costs of Tata which amounted to as much as Rs30 crore in 2015, most of which were for the use of private jets, it said. Tata was made chairman emeritus after Mistry took over and this “dual structure and attendant costs did not exist earlier”.
Mistry’s statement held that a new PR agency appointed by Ratan Tata just before he demitted office was another reason for rising costs. The new PR agency was awarded a Rs60 crore-a-year contract, Rs20 crore more than the previous firm was paid, the statement said. Mint is not naming these firms because it wasn’t able to reach them for comment. According to the statement, a part of the PR infrastructure was also provided to Tata Trusts, majority shareholders in Tata Sons, while it was paid for by Tata Sons.
In its 10 November note, Tata Sons cited falling dividend income and increasing impairment provisions, ballooning debt and low return on investments as reasons for removing him as chairman of the $103 billion group. The rise in expenses during Mistry’s tenure was also owing to a change in the way the group operated, his statement said. Earlier, group corporate centre members, directors and Ratan Tata drew their compensation as commission from Tata Sons and some from operating companies, too. After Mistry took over, the practice of taking commissions from group firms was stopped.
“This arrangement was a cleaner and more transparent system to ensure those involved in running the group were remunerated only by the group’s core investment company and not by the operating companies,” said the statement.
The statement also pointed out that Mistry had added a few senior positions such as group CTO (chief technology officer) and group strategy head which bumped up personnel costs. “The challenges the group faced could not be wished away. Each problem had to be dealt with a view to creating the most palatable solution for all stakeholders, while simultaneously trying to ensure that the situation did not deteriorate.”