In the latest segment in the ongoing public back-and-forth between Cyrus Mistry and the Tata Group, Mistry’s office has released a statement in response to Tata Sons’ statement on November 10, which was published as a full-page ad in several leading newspapers on November 11. Mistry’s office has said that the group is making “another brazen attempt to mislead the public and shareholders” into believing that the increase in the company’s expenses during Mistry’s tenure was because of his failures.
There were changes that led to this increase that were not in Mistry’s control, the statement says. Under Ratan Tata in the five years preceding Mistry’s tenure, several group centre members held non-executive roles in Tata Sons and drew compensation as commissions instead of salaries, skewing the base year comparisons, it says. In addition, these erstwhile directors also drew parallel commissions from other operating group companies. To make this more transparent, the statement says, the group centre under Mistry drew compensation only from Tata Sons. Nobody, including Mistry, drew commissions from other operating companies.
Also, Mistry added a few senior positions like a group CTO and a group strategy head that would pay dividends in the future.
One of the other causes of increase, Mistry’s office has said, was the end of services provided by Nira Radia (who was paid Rs 40 crore a year). She was replaced by Arun Nanda of Rediffusion Edelman, who was brought on board by Tata just before Mistry joined at the cost of Rs 60 crore a year. This PR service was paid for by Tata Sons, the statement says, though it also catered to the Tata Trust.
Tata Sons also bore the entire cost of office for Ratan Tata, which came to Rs 30 crore a year – a big part of which was on corporate jets. “This dual structure and attendant costs did not exist earlier,” the statement says.
Mistry’s office has also fought back the claims in the Tata’s statement that he did not turn around inherited hotspots and brought up “legacy” issues as the reason behind why this could not be done.
“Mr. Mistry did not approach any of the businesses with a view to do a quick cleansing so that he could immediately demonstrate decent results going forward. The efforts of Tata Sons, under his leadership has always been to look at Strategy, Structure and Leadership changes to drive operational improvements before examining Mergers, Exits or Shutdowns. All the decisions taken in this regard were in keeping with the Tata values and with the full consent of the Board. … The impairments and write downs at Tata Sons were due to legacy issues, largely relating to TTSL. There were also other investments of questionable nature such as Nagarjuna refineries (Rs. 400 Cr.) and SASOL JV. One investment in Piaggio Aero, a company in the aerospace sector with a friend of Mr. Tata, was especially distressing. Tata Sons decided to exit the company at a commercial loss of Rs 1,150 Cr. This was after the efforts of Mr. Bharat Vasani and Mr. Farokh Subedar who managed to recover Rs. 1,500 Cr., overcoming the objections of Mr. Ratan Tata who in contrast favoured increasing investments in that company. Today, the company is, for all practical purposes, nearly bankrupt.”
Mistry, the statement continues, was not a liability to the company but significantly strengthened the company’s ability to absorb future shocks.