Business

Tata sacking: Cyrus Mistry was 'lame duck' chairman

Cyrus Mistry Image copyright AFP

The ousted chairman of India's Tata Group has lashed out at the way his sudden departure was handled.

In a no-holds-barred email to the board seen by the BBC, Cyrus Mistry says he had become a "lame duck" chairman and alleges constant interference, including being asked to sign off on deals he knew little about.

He also warned the company risks huge writedowns across the business.

Tata said it currently had no response to the allegations.

The Bombay Stock Exchange has sought clarification from Tata on the contents of Mr Mistry's letter.

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Tata Sons, the holding company of Tata Group, unexpectedly replaced Mr Mistry with his predecessor Ratan Tata on Monday, giving no explanation or details about its decision.

But analysts say there was a clash over strategy, with the Tata family unhappy at Mr Mistry's policy of looking to sell off parts of the business - including Tata's European steel business - rather than holding on to assets and extending the firm's global reach.

Brutal assessment

Whatever the reasons, Mr Mistry has come out fighting. In his blistering five-page attack, he wrote that the board had "not covered itself with glory" and that the nature of his dismissal had done "immeasurable harm" to both his own reputation and that of the firm.

And he said that when he moved from being a non-executive director to chairman in 2012, he did "not have a clear grasp of the gravity" of problems he had inherited.

While saying that he did not want to "air a laundry list", Mr Mistry went on to unleash a brutal assessment of many aspects of the business, warning the firm may face 1.18 trillion rupees ($18bn) in writedowns because of five unprofitable businesses he inherited.

Issues he raised included:

  • Huge debts from many of its foreign investments including hotels, its chemicals business in the UK and Kenya, and steel operations in Europe.
  • A telecoms business that is "continuously haemorrhaging" money as well as facing a fine of at least $1bn
  • Tata Power struggling because of underestimating coal prices, and getting into clashes with local landowners

Mr Mistry said there was no sign of profitability on the Tata Nano project - which had been launched as the world's cheapest car - and criticised a failure to face up to the reality of its consistently losing money.

Image copyright AFP
Image caption Tata's European steel business is just one operation Mr Mistry says faces huge writedowns

"Any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from that crucial decision," he said.

Tata's foray into the aviation sector was also criticised, with Mr Mistry suggesting he signed up to joint ventures under pressure from the former chairman.

He claimed he was asked by Ratan Tata to sign off quickly on a tie-up with Malaysia's Air Asia to create Air Asia India and that "my pushback was hard but futile".

And he wrote that Tata's 51% stake in Vistara - a venture between Tata and Singapore Airlines - was also foisted upon on him "without the benefit of time and experience to fully evaluate the proposal".

Long association

Cyrus Mistry had been hand-picked as a successor to Ratan Tata as the second chairman from outside the Tata family and with high hopes that he would be the right man to steer the company.

He was the sixth chairman in Tata's 148-year history and the first chairman in nearly 80 years to come from outside the Tata family.

But Mr Mistry did not come into the job cold. His family has been a major Tata investor since the 1930s and controls companies holding 18% of Tata Sons.

And he knows the family well, not least because of his sister's marriage to Ratan Tata's half-brother, Noel.

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