In fresh salvo, Mistry says Ratan Tata made dubious investment decisions

Launching a fresh attack, Cyrus Mistry’s office has directly blamed Ratan Tata for pouring money into questionable deals that led to impairments and writedowns at Tata Sons. In particular, Mistry flagged a ₹400 crore investment in Nagarjuna refineries and Ratan’s reluctance to exit Piaggio Aero.

“The impairments and writedowns at Tata Sons were due to legacy issues, largely relating to Tata Teleservices. There were also other investments of a questionable nature, such as Nagarjuna refineries (₹400 Cr.) and SASOL joint venture,” Cyrus Mistry’s office said in a statement, in response to allegations by Tata Sons that he had failed to turn companies that were in trouble around.

Huge loss in Piaggio Aero

“One investment in Piaggio Aero, a company in the aerospace sector with a friend of Tata, was especially distressing. Tata Sons decided to exit the company at a commercial loss of ₹1,150 crore. This was after the efforts of Mr Bharat Vasani and Mr Farokh Subedar, who managed to recover ₹1,500 crore, 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,” it added.

The deal with Piaggio Aero was announced in 2008. Tata Group picked up a one-third share from Italy’s Piaggio Aero Industries, manufacturer of the Avanti II twin turbo-prop. The Ferrari and Di Mase families as well as the Abu Dhabi-based Mubadala Development Co, were the main shareholders of Piaggio then.

Paying for corporate jets

On the allegations of rising costs under Mistry’s tenure, his office said Tata Sons “failed to acknowledge that Tata Sons was also bearing the entire office costs of the Chairman Emeritus, Mr Ratan Tata. This figure was about ₹30 crore in 2015. A significant amount of which was for the use of corporate jets.”

Parallel commissions

Mistry’s office said that in the five years preceding 2012, several group centre (GCC) members held what were deemed to be “non-executive” roles in Tata Sons. As such, they, including Ratan, drew their compensation as commissions from Tata Sons instead of salaries, “which skews base year comparisons. It is also public knowledge that several erstwhile directors of Tata Sons drew additional parallel commissions from operating group companies,” the statement said.

The change in the public relations agency also added to the cost, said Mistry’s office. Nira Radia (Vaishnavi Communication) was being paid ₹40 crore per year. She had been replaced by Arun Nanda (Rediffusion Edelman) “who had been brought in by Mr Ratan Tata at a cost of ₹60 crore per year for PR support just prior to Mr Mistry taking charge. It is worth noting that a part of this PR infrastructure was also provided to the Tata Trusts, while paid for by Tata Sons.”