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Cyrus Mistry’s family investment firm has shot off a fresh missive questioning the strategy being adopted by Tata Sons under its new Chairman, N Chandrasekaran.
Cyrus Investment Private Ltd, a shareholder of Tata Sons, has sent the communication to the board of directors, raising concerns over various issues, including the sale of Tata Teleservices to Airtel, the declining performance of Tata Motors, the growing debt of Tata Steel and the lack of action on Air Asia despite a case being registered against a top functionary of Tata Trusts.
The eight-page letter, seen by BusinessLine, was sent on Saturday. This comes just a few days ahead of the final order by the National Company Law Tribunal, slated for July 4, in the dispute between Cyrus Mistry and Tata Sons over the latter’s ouster as Chairman of Tata Sons. The Mistry family owns an 18.4 per cent stake in Tata Sons.
“While we have lost hope for a credible response to the multiple correspondence addressed to the Chairman of our company, we still feel the need to address you on a number of issues and developments ... recent media reports and statements given by the Company present a cause for concern,” the letter stated.
On the telecom business
Raising questions on the group’s telecom businesses, Cyrus Investment Private Ltd said that there is no clarity on why Airtel was given free access to Tata Teleservices’ fibre assets. Terming the sale of Tata Tele’s business as being completely one-sided, in favour of Airtel, the Mistry firm said there was also no explanation given by Tata Sons as to why a deal to sell the enterprise business was not pursued despite an offer of a billion dollars made by a Tata employee (Mukund Rajan) backed by a private equity investor.
“We also note from media reports that the rush to declare victory over the problems in the telecom sector is contradicted by suggestions that even this one-sided deal has not been concluded as the government may permit completion only when the dues are cleared,” the letter stated.
On Tata Motors, the investment firm said the 34 per cent deterioration in performance was a matter of concern. “It is unfortunate that no action has been taken to arrest the bleed suffered due to continuing the operations of the Nano project despite meagre sales,” it said. “It’s important to note that the share price of Tata Motors is at a five-year low. This impact on Tata Sons is significant, as after TCS, it constitutes the largest company in Tata Sons’ portfolio,” it added.
On the Air Asia probe
On the ongoing investigation into Air Asia by the Central Bureau of Investigation, the investment firm said the Tata Sons board had failed in its fiduciary duty by continuing to support R Venkataramanan, the nominee on the Air Asia board named by the investigating agency for allegedly influencing government policy.
“The unprecedented act of allowing an individual who has brought a reputational risk to Tata Sons and Tata group to continue in his position not only flies in the face of past precedent in the Group, but also sends a terrible message to hundreds of employees that there are no consequences to being accused by the country’s premier investigating agency of gross violation of law.” it said.
On Tata Steel, the Mistry firm expressed concern over debt rising with the acquisition of Bhushan Steel. “If the commodity cycle and the uptick in steel prices are to change again, leading to a decline in prices, Tata Steel will once again stand highly exposed, with serious consequences.”
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