Cyrus Mistry was trying to get Siva group to pay share of DoCoMo award4 min read . Updated: 09 Nov 2016, 03:30 AM IST
At his penultimate Tata Sons board meeting as chairman, Cyrus Mistry raised the issue, the documents show
Ousted Tata Sons chairman Cyrus Mistry was pushing C. Sivasankaran, who had played dealmaker in several Tata group transactions in the past, to pay up the Siva group’s share of the DoCoMo award, and also discussed with the board of the holding company possible legal action against the sometimes controversial, Seychelles-based entrepreneur, documents seen by Mint show.
On 15 September, at his penultimate Tata Sons board meeting as chairman, Mistry raised this issue, the documents show. He was removed as chairman when the board next met on 24 October.
Interestingly, on 19 September, Tata Sons (Tata Teleservices Ltd and NTT DoCoMo Inc. are named as co-respondents) received a legal notice from a firm retained by Sivasankaran’s Sterling Info-tech Ltd, alleging mismanagement of Tata Teleservices and reserving the right to seek damages to “recover its (Sterling’s) losses".
Mint learns that a decision on how to respond to this email had not been taken till Mistry’s exit.
Tata group spokesperson Debasis Ray said in an email response to Mint’s queries that in 2008, when “Docomo agreed to acquire shares of Tata Teleservices, Tata Sons voluntarily offered other shareholders of TTSL an opportunity for a pro-rata sale of their holdings. This was subject to the shareholders agreeing to bear a pro-rata portion of any claims or amounts payable to Docomo should such an event arise.... Thereafter in 2014, Docomo exercised the put option. In terms of the agreement with the selling shareholders, Tata Sons demanded from Mr Sivasankaran his pro-rata share of the amount payable to Docomo."
Ray added that “Tata Sons is pursuing all legal options for recovery of this amount."
Mint couldn’t ascertain whether the company had responded to Sivasankaran’s notice. Sivasankaran could not be reached for comment immediately.
The notice from Sivasankaran’s law firm mentions his “long-standing association with the Tata Group of Companies on account of his close association with Mr Ratan Tata".
Sivasankaran has had several dealings with the group, taking Barista, India’s first coffee chain that the Tata group had acquired, off its hands, selling Dishnet DSL to the Tata-owned VSNL, which subsequently became Tata Communications, and facilitating the sale of the Tata stake in the Birla-Tata-AT&T telecom venture to the Aditya Birla Group, resulting in the formation of Idea Cellular Ltd.
In early 2006, the Siva group acquired 520 million shares in Tata Teleservices at ₹ 17 per share or ₹ 84 crore. It paid ₹ 02 crore towards this, the documents show. It paid the balance in February 2006. Of the ₹ 82 crore, the documents show that ₹ 50 crore was funded by a loan from Standard Chartered Bank effectively guaranteed by Tata Sons. The balance ₹ 32 crore came from Kalimati Investments, a subsidiary of Tata Steel.
Ray confirmed both and said that “to ensure that in the event of a default on the repayment of the loan, the shares of Tata Teleservices were not sold to a third party, Tata Sons agreed to an arrangement whereby the bank would sell the shares to Tata Sons".
He added that “a part of the consideration was funded by another Tata company for a few days on market-linked terms".
In 2006, when the loan was refunded, the Tata group withdrew this guarantee, and the Siva group had to provided other collateral to the bank, the documents show.
Then came the 2008 deal with DoCoMo under which the latter bought shares amounting to 26% of Tata Teleservices’ equity. Of the 26%, 20% was to be fresh equity and 6%, a sale by existing shareholders. Under this, the documents with Mint show, Sivasankaran sold 20.74 million shares at Rs117.81 apiece, turning a tidy profit.
The DoCoMo investment eventually turned sour, and with no initial public offering in sight, the Japanese company exercised a put option. The resulting litigation led to an award of Rs8,450 crore to DoCoMo. Of this, the Siva group’s share was Rs694 crore.
The September legal notice from the Siva group and a letter to Mistry in October 2013 from Sivasankaran refer to Tata Teleservices’s dire need for equity, and present the Siva group’s investment in the company as a sort of lifeline.
This representation was disputed by Mistry in his response to the letter. “I have been advised by Mr (Ratan) Tata that the investment made by the Siva Group was made principally on the consideration that the telecom sector was fast-growing and represented a good investment opportunity." In his letter, Sivasankaran referred to an earlier letter to Ratan Tata in 2011 seeking assistance in finding a buyer for the Siva group’s holding in Tata Teleservices.
He further asks Mistry for a “fair resolution" (presumably a buyback of his holdings) “in line with the mutually benevolent relation between the Tata group and Siva group which made the Siva group walk the extra miles to support the Tata group by undertaking risks which no financial investor acting in self-interest would".
From Ray’s comments, it looks like that resolution is headed for the courts.