In this file photo of Ratan Tata with Cyrus Mistry. Tata Sons on Monday removed Cyrus Mistry as its Chairman, nearly 4 years after he took over the reins of the group. Tata makes a comeback, taking over as the company's interim boss for 4 months.
Ousted chairman of Tata Sons Cyrus Mistry on Tuesday said several decisions by his predecessor Ratan Tata were taken primarily to satisfy his ego and this resulted in huge financial losses for the Tata group. Mistry also said Ratan Tata had planned to sell the group’s current cash cow and India's largest software exporter TCS to IBM in its initial years but his proposal was rejected by JRD Tata on advice from FC Kohli, who helped set up the company.
“Kohli was suffering from a cardiac condition and Tata was then heading Tata Industries’ joint venture with IBM,” a statement issued by Mistry’s office said. “Tata approached JRD with a proposal from IBM to buy out TCS, but JRD refused to discuss the deal because Kohli was still recovering in hospital,” the statement added.
“On his return, Kohli assured JRD that TCS had a bright future and the group should not sell the company. JRD turned down the offer, demonstrating true vision. But it was a near-death experience for TCS at the hands of Ratan Tata,” the statement said.
Mistry’s statement follows full-page claims published in several newspapers by Tata Sons on November 10 that said, among other things, Mistry had not contributed to the success of TCS or Jaguar Land Rover.
“It is a common knowledge that the decision to acquire Corus for over $12 billion, when only a year earlier it was available at less than half that price, was based on one man’s ego and against the reservations of some board members and senior executives. The overpayment made it harder to invest in the acquired assets, which had been neglected, and thereby, placed many jobs at risk,” Mistry’s statement said.
A Tata Steel director who did not wish to be named said the board of Tata Steel had to ratify the price for the Corus acquisition after the final bid was made by Ratan Tata. The acquisition of Corus had resulted in Rs 70,000 crore losses for Tata Steel till date, the director said.
Mistry had earlier said Tata Steel was facing a potential writedown of another $10 billion.
“Similarly, in November 2003, Ratan Tata, against the advice of many of his own team members, decided to back CDMA technology as the platform for the group’s telecom business. This ‘strategic’ decision has led to a series of consequences that currently leaves the company (Tata Teleservices) structurally challenged. Once again, one person’s judgement adversely affected the jobs of thousands,” said Mistry’s statement.
Tata Teleservices, according to an earlier statement by Mistry, is facing $4-5 billion of potential writedowns.
Mistry said each company within the group was a leader in its space and their position in the market was all due to management decisions.
“For TCS to flourish, it was vital that it transformed from an IT solutions provider to a strategic partner because the digital imperative had become a strategic differentiator for many organisations. Consequently, the client relationship needed to move from engaging with the CIO (with whom traditionally Indian IT company CEOs maintained their relationships) to the CEO,” Mistry’s statement said.
“As chairman of Tata Sons and Tata Consultancy Services, Mistry’s access to senior stakeholders across the world was an enabling platform. Over the last three years, Mistry met at least 60 global CEOs, some along with the TCS leadership, to reinforce the capabilities of TCS for organisations to co-innovate in the digital world,” the statement added.
The statement lauds the role of TCS CEO N Chandrasekaran in working with Mistry to take the company to the next level. “One of the first items for Mistry on his joining the TCS board was to focus the management on reducing the gap between profits and cash. Chandrasekaran and his team responded splendidly, improving the cash conversion cycle from 49 per cent in 2012 to 92 per cent in 2015. The improved performance enabled TCS to declare a special dividend without compromising firepower for acquisitions. Cash and cash equivalents doubled over the same period to Rs 20,500 crore,” the statement added.
Similarly, Mistry lauded the role of Ralph Speth, CEO of Jaguar Land Rover. “JLR is at a critical juncture. The decisions taken today will decide its future resilience. The company faces many challenges, but also many opportunities,” the statement said.
It added that Mistry was closely associated with JLR, its strategy meetings and design reviews. Between 2012 and 2016, Mistry spent over 120 days, including 38 days on JLR’s design review, 56 days on offsite strategy meetings as well as market visits to dealers in China, the US and India. This did not include the time Mistry devoted to board and budget meetings.
Both Speth and Chandrasekaran were inducted into the board of Tata Sons after Mistry was ousted on October 24.
Mistry’s statement said, ideally, a leader did not quote data in his defence, but the continued insinuations and leaks had forced him to set the record straight.
“While Tata Sons, under the leadership of Ratan Tata, is busy apportioning credit and blame for the performance of operating companies, Mistry wishes to place on record his appreciation for the hard work done by the leadership teams of those companies, who in Ratan Tata’s opinion have shown less than stellar performance,” the statement said.
Mistry’s statement came amid announcements by Tata Power and Tata Chemicals today to stock exchanges that they had called extraordinary general meetings of shareholders to remove him as a director. The Tata Chemicals notice also calls for removal of Nusli Wadia as a director.