Companies

Ratan Tata ‘was informed’ of Welspun deal

Raghuvir Srinivasan Mumbai November 8 | Updated on January 27, 2018 Published on November 08, 2016

The imbroglio over DoCoMo and divestment of some Tata Steel assets in the UK is widely seen as factors that precipitated the downfall of Cyrus Mistry.

In addition to this, Tata Power’s solar power plant deal with Welspun is also cited as an example of Mistry’s bad leadership. Sources on Mistry’s side though have a different story.

They say that Ratan Tata was emailed the Welspun proposal at an early stage but he missed seeing it due to his travel schedule and hence was taken by surprise when it was announced.

When the deal was placed before the Tata Sons board, Tata is supposed to have sent word through Vijay Singh, director representing the Tata Trusts, that he believed it was a violation of the Articles of Association of Tata Sons.

Mistry, however, stood his ground saying that he wouldn’t accept it as a breach as Tata was informed well in advance.

If Tata insisted on recording the breach in the resolution, Mistry would record his view as well. Faced with this response, Vijay Singh and Nitin Nohria, the other director representing the Trust, left the board meeting to consult Tata who relented.

In the case of Tata Steel, the Mistry camp believes that it did a lot of good work but yet has been blamed.

“The amount of work that’s gone into it is unbelievable… this was not an American style cut and slash,” the source who is close to Mistry said.

Other issue

According to him, the issue was not one of mere operational improvements but costs such as for energy, which was high, taxes and pension fund contributions.

Referring to the Sea Rock deal in Indian Hotels, the Mistry camp says that it still believes that it is a marquee property and there is a strategic rationale to its acquisition.

The fact though is that its price was inflated and the housing of the deal in an off-balance sheet vehicle imposed costs on Indian Hotels.

According to the source, Mistry was never opposed to paying DoCoMo its dues as part of the settlement.

“For him, reputation is very important and he would not default on obligations but in this case there was a legal issue,” the source says.

Even so, Mistry is supposed to have met the powers that be in Delhi and even invited DoCoMo to go along to lobby but the Japanese firm did not join in. It was a badly structured deal in the first place, says the source.

Published on November 08, 2016
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