Odds stacked against Nusli Wadia at Tata Motors EGM
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Mumbai: Shareholders of Tata Motors Ltd voted on a resolution on Thursday to remove Nusli Wadia as a director at the company’s extraordinary general meeting (EGM).
Though the voting results were not released at the time of going to press, the odds seemed to be stacked against the industrialist who has been a director on the Tata Motors board for more than 18 years, if the number of shareholders who spoke in favour of the resolution seeking his removal was any indication.
Tata Sons, the Tata group holding company, in November sought the removal of Wadia as director of Tata Steel, Tata Motors and Tata Chemicals. Tata Sons controls 26.51% of Tata Motors, 29.75% of Tata Steel and 19.35% of Tata Chemicals.
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Earlier this month, Wadia filed a Rs3,000 crore defamation suit against Ratan Tata and the board of Tata Sons.
Global proxy advisory firm Institutional Shareholder Services Inc. (ISS) questioned the rationale behind resolution to seek removal of Wadia, an independent director at three Tata companies. Proxy advisory firm Stakeholder Empowerment Services (SES) on the other hand, recommended shareholders of Tata Steel, Tata Motors and Tata Chemicals to vote in favour of a resolution to remove him. Both developments happened earlier this month.
Sixty-three people spoke at the EGM; most spoke in favour of the resolution.
Before the meeting, Wadia, who did not attend the EGM, had made his case to the company’s shareholders in a letter. Wadia said he had chosen not to attend, calling the recent EGMs as “inappropriately and shamefully stage-managed”.
Wadia, 72, was removed as an independent director from the board of Tata Steel Ltd late on Wednesday with a majority of both institutional and retail investors voting against him at an EGM. On Friday, he will face a similar test at an EGM called by Tata Chemicals Ltd to remove him.
Wadia’s four-page letter to Tata Motors shareholders, dated 21 December, spoke of attempts by Tata Sons to influence independent directors and the board of Tata Motors through unsigned legal opinions. These opinions, he said, were circulated just hours before a company board meeting to “influence, intimidate and muzzle the independent directors from communicating with the stock exchanges”.
He wrote about the company’s ill-conceived investments in low-cost passenger car Nano and the delay in its closure leading to a serious drain on the finances of the company. Wadia said every sale of Nano was at a substantial loss to Tata Motors, with total losses on Nano running into thousands of crores.
Wadia also wrote about cross-holdings in Tata companies, the largest of which, he said, was Tata Sons valued at Rs8,600 crore.
Wadia said the cross-holdings were being held in Tata Motors, a debt-ridden company, to keep voting control over Tata Sons. “The listed companies as a whole have blocked approximately Rs70,000 crore in holding Tata Sons shares equivalent to 14% of its capital with the sole purpose of shoring up the voting rights of the (Tata) Trust(s).”
“It is for you the shareholders of Tata Motors who own 70% of the shares of your company to decide whether you want to be the holder of Tata Sons shares with minimum return, zero liquidity and no exit,” he wrote.
Wadia said it was the first time in Tata Motors’ history that a productivity-linked settlement was agreed, initiated and was to be signed with the union in Pune after 14 months of discussion, but Ratan Tata met the union and asked them to support the change in leadership. “The union subsequently issued a statement that their relationship with the management of the company had taken a downward trend over the issues. This irresponsible action galvanizing and acting prejudicially against the interest of your company may jeopardise its future and impact the overall morale of all the workers and employees of Tata Motors.”
The letter also pointed to the impact on the passenger vehicle business due to issues in design, product, quality, execution and high costs “being directed from the top”. “The division has high capital employed, high level of loss that impacts overall financials of the company,” he wrote.
“What is at stake now is not whether I am removed or not, but the fate of the very institution of the independent director that has been created in law and by Sebi (capital markets regulator Securities and Exchange Board of India) to safeguard the interests of all stakeholders,” the letter said.
On Wednesday, Wadia had said that the ability of promoter Tata Sons to seek removal of independent directors from group company boards could force them to either “toe the line, resign or face removal”.