New Delhi: Cyrus Mistry has written an explosive and combative email to the Tata Sons board members and Tata trustees in which he has claimed that he had been reduced to a "lame duck" chairman as Ratan Tata still continued to exert considerable power over the Tata Group.
Cyrus Mistry called the move to remove him "unparalleled in the annals of corporate history" and wrote that he had not been allowed freedom of action to manage the affairs of the Tata group because of changes in the articles of association of Tata Sons.
I am shocked beyond words at the happenings at the board meeting of October 24, 2016. Apart from the invalidity and illegality of the business that was conducted, I have to say that the Board of Directors has not covered itself with glory," Mistry wrote in his mail.
Mistry said that in 2011 he had been approached by Ratan Tata and Lord Bhattacharyya individually to become Chairman, but had declined. However, as the search committee was unable to find a suitable candidate he overcame his initial "reluctance" and accepted.
To "replace" your Chairman without so much as a word of explanation and without affording him an opportunity of defending himself in a summary manner must be unique in the annals of corporate history," Mistry added.
But after the appointment, Mistry said, the Articles of Association were amended, changing the terms of engagement between the trusts, the board and the chairman. This limited the ability of the Tata group to engineer the necessary turnaround.
I cannot believe that I was removed on grounds of non-performance," he further added.
The email further questions whether the board members understood the extent of the problems Mistry had "inherited".Here is a list of challenges that Mistry says he faced, as written in the email.Debt Overhang
The foreign acquisition strategy, with the exception of Tetley and Jaguar Land Rover, left a lot of debt. The European steel business faced potential impairments in excess of $10 billion. Foreign properties of Indian Hotels Company and Orient Hotels were sold at a loss and Tata chemicals still needs tough decisions about its UK and Kenya operations.Tata Capital
The company’s books required significant cleanup on account of bad loans to the infrastructure sector.Telecom
Of all the companies in the portfolio, the telecoms business has been continuously hemorrhaging. If this business were exited via fire sale or shut down, the cost would be $4-5 billion. This is in addition to any payout to DoCoMo, which would be in excess of a billion dollars.Tata Power
The losses in 2013-14 alone amounted to 1,500 crore rupees.Tata Motors
Non performing assets of Tata Motors Finance are in excess of 4,000 crore rupees, because of extending credit with lax risk assessment. The Nano has consistently lost money, peaking at 1,000 crore rupees. Any turnaround strategy for Tata Motors will involve shutting the Nano project. Emotional reasons alone have kept us away from this.
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