Month: October 2016

Cyrus Mistry strikes back

On 24/10/2016 Tata Sons Board removed Cyrus Mistry as Chairman and appointed Ratan Tata as Interim Chairman. On 25/10/2016 some spoke on the side of Ratan Tata. Harish Salve said Cyrus Mistry was incompatible with Tata values. Next day Dushyant Dave said Ratan Tata does not have good reputation due to his association with Niira Radia. Stanley Pignal of The Economist said Tatas are opaque if not secretive.
On 26/10/2016 Cyrus Mistry wrote a letter to Directors of Tata Sons Ltd. According to one source the letter was written on 25/10/2016 and e-mailed at 10.05 p.m. Anyway the letter became public on 26/10/2016. That elicited a response from Abhishek Manu Singhvi. Harish Salve, Abhishek Manu Singhvi, Mohan Parasaran are lawyers hired by Tata. P. Chidambaram and Justice Raveendran are also mentioned.
Tata Sons did not have retirement age for Chairmen. When Ratan Tata was to become Chairman of Tata Sons he wanted to get rid of Chairmen of group companies who were there for many years. J. R. D. Tata, then Chairman of Tata Sons, sided with Ratan Tata. Executive Chairmen were to retire at 65. Non-Executive Chairmen were to retire at 75. Ratan Tata got rid of Chairmen like Rusi Modi who headed TISCO.
When Ratan Tata was nearing 75 his half-brother Noel Tata was expected to succeed him. To the surprise of many Tata Sons appointed a selection committee to find a successor to Ratan Tata. Obviously Ratan Tata did not want Noel Tata to succeed him. Once again to the surprise of many Cyrus Mistry who was a member of the selection committee became Chairman.
There is family connection here. Ratan Tata is the son of Naval Tata and his first wife Sonoo. Noel Tata is the son of Naval Tata and his second wife Simone. Cyrus Mistry is the son of Pallonji Mistry and Patsy Perin Dubash. His sister Aloois married to Noel Tata. Cyrus Mistry is brother-in-law of Noel Tata and half-brother-in-law of Ratan Tata.
Cyrus Mistry in his letter said he was shocked beyond words at the happenings of Board meeting on 24/10/2016. His replacement without explanation and opportunity to defend himself was invalid and illegal and must be unique in the annals of corporate history. In 2011 he had initially refused to be Chairman when Ratan Tata and Sushanta Bhattacharya had approached him. He was asked to reconsider and after consulting his family he accepted. He was assured of a free hand. After his appointment the Articles of Association were changed and inappropriate interpretation followed.
Foreign acquisitions except for JLR and Tetley had left a huge debt overhang. Steel, hotel and chemical businesses outside India made losses. Tata Capital had made losses. The loan to Siva under strong advice of Venkataraman resulted in loss. Telecom business has been continuously haemorrhaging. The original structure of Docomo raises several questions. Tata power’s bid for Mundra project resulted in loss. Tata Motors lost 1,000 crores to keep Nano going. Nano supplies plant supplies gliders to a company where Ratan Tata has a stake. Due to losses the write down could be 118,000 crore rupees. Dividends were reduced. On the positive side Kalinganagar project was completed.
Ratan Tata negotiated Air Asia and Singapore Airlines JV and presented Cyrus Mistry with fait accompli. In case of Air Asia there are fraudulent transactions of 22 crore rupees. Venkataraman is on the board of Air Asia.
Mistry mentioned under him the net worth of Tata Sons increased from 26,000 crore rupees to 42,000 crore rupees.
Mistry mentioned the amendment to Articles of Association created alternative power centres and resulted in dysfunctional governance. Once trust directors Nitin Nohria and Vijay Singh left the Board meeting for almost an hour to get instructions from Ratan Tata.
Mistry cannot believe he was removed for non-performance as Nomination and Remuneration Committee had recently commended his performance.
Cyrus Mistry at the end mentions he was pushed into the position of a lame duck Chairman. He has his pride and dignity intact.
Abhishek Manu Singhvi said Cyrus Mistry should not wash dirty linen in public. Cyrus Mistry was removed on moral, propriety factors. He said Ratan Tata is not a master puppeteer. The removal is not illegal. He asked “Does Mr. Mistry think the entire eminent Board is insane? They all lost confidence in him.”
Cyrus Mistry was the second person without Tata surname to be Chairman of Tata Sons. The first was Nowroji Saklatwala (1932-1938).
How much money did Tata Group borrow from banks? How much debt was converted into strategic debt restructuring? How much debt was converted into corporate debt restructuring? How much debt was repaid? How much debt is default? I understand Tata Steel owes 88,000 crore rupees to banks. We need to know everything about Tata Group loans.

Return of Ratan Tata

On 24/10/2016 Tata Sons Board removed Cyrus Mistry as Chairman and replaced him with Ratan Tata as Interim Chairman. This was a surprise.
Ratan Tata is 78. He had retired in 2012. Cyrus Mistry is 48. He was 44 when he became Chairman. Mistry’s election in 2011 was a surprise. He was in the committee to select a successor to Ratan Tata. The committee elected him. Now Tata Sons has formed a selection committee to find a permanent Chairman. The committee comprises Ratan Tata, Venu Srinivasan, Amit Chandra, Ronen Sen and Sushanta Kumar Bhattacharyya.
There have been various reactions to Mistry’s removal. What happened to Cyrus is a Mistry. Surgical strike at Tata Sons. Tata group Shows Cyrus Mistry the door. Cyrus Mistry removed as Tata Sons chief, Ratan Tata is interim chairman. Cyrus Mistry sacked in Tata Sons churn. Tata Sons is the new Samajwadi Party. Tata Sons unexpectedly removes Cyrus Mistry as Chairman. Tata Sons in turmoil after Chairman’s bizarre ousting.
Tata Trusts own majority of shares of Tata Sons. Around 66%. Mistry family owns around 20% of shares of Tata Sons. Ratan Tata controls Tata Trusts. The Tata camp is said to have obtained legal opinion of former Solicitor General Mohan Parasaran about removing Mistry. Mistry is said to have been told about Tata Trusts being unhappy about him and he insisted on Board vote. Mistry may move court against his removal.
Tata companies have faced challenges and many have suffered losses. There is arbitration with NTT Docomo. Ratan Tata is said to have been unhappy with the decisions Mistry took regarding Indian Hotels, Corus, and Tata Chemicals.
It will be interesting to see who will be Chairman of Tata Sons. How long Ratan Tata will be Interim Chairman? It may be more than four months.

SBI should be split

There is a plan to merge SBI’s five subsidiaries with SBI. This is a bad plan. Arundhati Bhattacharya has got one year extension ostensibly to oversee the merger. The extension reflects poorly on the government and other SBI officials.
SBI has lost thousands of crores of rupees if not lakhs of crores of rupees due to bad loans. We do not know the exact figure because we do not know how much amount went into corporate debt restricting, strategic debt restructuring, and loan write-offs. There is recapitalization going on and this year SBI is to receive 7,575 crore rupees. It is to receive more amounts in future. Recapitalization means RBI printing notes and giving to banks. If SBI had been a small or medium bank the4 losses would not have been high.
State Bank of India is too big to fail. It should be split as per plan below.
SBI branches in Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland and Tripura will be State Bank of Shillong.
SBI branches in West Bengal and Sikkim will be State Bank of Calcutta.
SBI branches in Bihar will be State Bank of Patna.
SBI branches in Orissa and Jharkhand will be State Bank of Bhubaneshwar.
SBI branches in Himachal Pradesh and Uttarakhand will be State Bank of Simla.
SBI branches in Jammu and Kashmir will be State Bank of Srinagar.
SBI branches in Punjab will be State Bank of Ludhiana.
SBI branches in Rajasthan will be State Bank of Amber.
SBI branches in Madhya Pradesh and Chhattisgarh will be State Bank of Bhopal.
SBI branches in Gujarat, Dadra and Nagar Haveli, Diu and Daman will be State Bank of Ahmedabad.
SBI branches in Goa and coastal districts of Maharashtra will be State Bank of Konkan.
SBI branches in Vidarbha will be State Bank of Nagpur.
SBI branches in remaining districts of Maharashtra will be State Bank of Poona.
SBI branches in Karnataka will be State Bank of Adyapady.
SBI branches in Kerala, Mahe and Lakshadweep will be State Bank of Cochin.
SBI branches in Tamil Nadu, Pondicherry, Karaikal, Andaman and Nicobar Islands will be State Bank of Madras.
SBI branches in Telangana, Andhra Pradesh and Yanam will be State Bank of Anantapur.
SBI branches in Chandigarh, Delhi, Haryana, Uttar Pradesh and abroad will remain State Bank of India.