Tata Power: Stormy board meet ahead

Prominent chartered accountant Nawshir H Mirza is known for his involvement in corporate governance. Mirza, who has been a speaker on the topic at conferences across the world for years, is among the 12 directors on the board of Tata Power. He, along with several other independent directors, may make it a stormy affair when the Tata Power board meets on November 29, sources indicated.

The Tata Power directors’ gallery is a curious mix of the old and the new, with the possibility of many backing the ousted Tata Sons chairman Cyrus Mistry. Anticipating fireworks at the board meeting, parent company Tata Sons is likely to work on strategies to cross the hurdle, not wanting a repeat of Indian Hotels Company (IHC), an executive pointed out.

Apart from Chairman Cyrus Mistry and Mirza, Tata Power board directors are Homiar S Vachha (former ICICI executive), Deepak M Satwalekar (former HDFC executive), Ashok Basu (former steel and power secretary), Pravin Kutumbe (LIC nominee), Sandhya S Kudtarkar (a Tata group employee), Anjali Bansal (senior advisor to private equity player TPG), Vibha Padalkar (HDFC executive), Sanjay Bhandarkar (former MD of Rothschild India), Anil Sardana (chief executive officer and managing director of Tata Power) and Ashok S Sethi (chief operating officer and executive director of Tata Power).

Three of these — Bansal, Padalkar and Bhandarkar — were inducted just days before Mistry was removed as Tata Sons chairman.

At the board meeting of IHC, which runs the Taj group of hotels, independent directors had strongly backed Mistry, followed by a similar show of support at the Tata Chemicals board meet. While the Tata Steel board was divided on supporting Mistry, the board of Tata Motors supported the management.

Even as the board meet outcome may not change things materially in the biggest corporate battle in recent times, it has its psychological impact on investors and shareholders. Among the group companies, Tata Consultancy Services and Tata Global Beverages have already removed Mistry as chairman on their respective boards. Tata Sons has also sent notices to several group companies for calling EGMs of shareholders as part of a process to remove Mistry as director on the various boards. Tatas may want to complete the EGMs of the various group companies before the year ends.

Even as Tata Power financials have been under stress, the company is extremely significant in the group portfolio. It is India’s largest integrated power producer with a capacity of 10477 Mw capacity and power distribution licences in major cities of Mumbai and Delhi, is as old as Tata Steel and its real estate assets are huge, is how an official described Tata Power.

The company’s real estate cuts across states — from Mumbai to hill station Lonavala in Maharashtra, and then in other parts of the country including Gujarat, Odisha, West Bengal, Jharkhand and Karnataka among others.

This will be the first time that Tata Power board will meet after the sudden removal of Mistry as the chairman of Tata Sons on October 24. Corporate governance proponents on the board of Tata Power are expected to take up the contentious issues linked to Mistry’s ouster, it is believed.  Tata Sons held a 31.05 per cent stake in Tata Power and the total promoter holding was 33 per cent as of end of September.

After Mistry’s ouster, when Tata Power’s $1.2-billion deal with Welspun Renewables came up in the context of not getting parent company’s approval, independent director Mirza told the media that the board had unanimously endorsed the proposal and that it was in line with the company’s strategy to quickly build a large non-conventional energy portfolio.

In fact, Tata Power has been in the limelight ever since the Ratan Tata-Mistry war broke out in the open. Tata Power’s Mundra ultra mega power plant (UMPP) in Gujarat was one such. The changes in international rules governing coal sales had put the Mundra plant in a spot, consequently impacting Tata Power financials as well. “Tatas will go down the tube but not abandon a project,” a senior executive in the company had told Business Standard when the Mundra plant was few months into operation.

Mistry said wrong business decisions were the main reason for mounting losses at the Mundra UMPP. In a letter to Tata Sons board members, he said, “Tata Power aggressively bid for the Mundra project based on low-priced Indonesian coal.”

Losses of Coastal Gujarat Power Ltd, Tata Power’s wholly owned subsidiary, have come down from Rs 1,492 crore in 2013-14 to Rs 306 crore in 2015-16. The losses at Mundra had impacted Tata Power as well which recorded a loss of Rs 33 crore in 2013-14, but has since recovered to post Rs 1,067 crore profit after tax in 2015-16.

Tata Power consolidated debt stood at Rs 38,665 crore at the end of March 2016.

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