As Tata, Mistry gear up for bitter battles, here are the messy developments over the weekend

As majority of Indians celebrated Diwali over the weekend, after-shocks of the bomb that exploded on Monday last continued at Bombay House.

Here is a round-up of all the key developments over the weekend:

Late Friday
Mistry steps up attack on Tata



Stepping up his attack on the Tata Group in general and Ratan Tata in particular, ousted chairman Cyrus Mistry, on Friday, denied group's claim that the board was not properly consulted on Tata Power's purchase of Welspun Power in June.

"It is surprising that Ratan Tata has sought to justify Monday's conduct by making vague public statements that are contrary to his knowledge and contrary to the records of the Tata Group. Tata sources said the trustees of Tata Trusts were not kept informed about the transaction with Welspun Power," Mistry said in a late night statement. He said that all the board notes were shared with Tata in his capacity as the chairman emeritus of the group.

Presenting his side of the facts, Mistry said in the early part of 2016, Tata Power had made a presentation to Tata Sons that a significant focus area would be the renewables sector. And this was appreciated by the Tata Sons board. "On May 31, 2016, a note was circulated to the board of Tata Sons and to Tata providing information about the proposed Welspun transaction, and asking them if they needed any further information. "The only board member to reply was Vijay Singh, a nominee director of Tata Trusts on the Tata Sons board, who appreciated the plan. And with no other view having been expressed, Tata Power executed the agreement on June 12, 2016," Mistry said.

Mistry further claimed that even after the conclusion of the deal for a Rs 10,000 crore, a series of discussions took place in the presence of Tata, and trustee NA Soonawala. "These discussions included much more detailed interaction with the merchant bankers to the transaction. Soonawala had strong views on how this listed operating company must structure its transaction and proceeded to have further meetings with the merchant banker," he said. Since shareholder nod was needed to arrange the funds for the transaction, the deal was discussed again at the Tata Sons board. "

On June 30, 2016, Anil Sardana, CEO of Tata Power, made a detailed presentation to the Tata Sons board. The discussion covered all aspects of the transaction including the structure and the Tata Sons board unanimously approved the transaction," Mistry claimed in the statement.

The minutes record that Nitin Nohria and Vijay Singh "after discussing the proposal with Tata and Soonawala", while reiterating their view that the proposal should have come to the trustees earlier, approved the transaction. "Therefore, to even suggest that the Tata Sons board including the nominee directors of the Tata Trusts had not been adequately informed is contrary to the factual record," he concluded.

Hitting out at Cyrus Mistry for making 'unsubstantiated claims and malicious allegations', Tata Sons, on Thursday, said the former chairman was fully empowered to lead the group and its companies but had "overwhelmingly" lost the confidence of board members. The promoter company of the major Tata group companies also alleged that Mistry's tenure was marked by repeated departures from the culture and ethos of the group.

Three Mistry men quit
The Times of India reported that three of Mistry's men quit Tata Sons. The executives who quit are N S Rajan, Madhu Kannan and Nirmalya Kumar. All the three were on the Group Executive Council, which was set up Mistry earlier and disbanded soon after he was ousted.

Rajan had joined Tata Sons as group HR head from Ernst and Young. He had also worked in various ogranisations, including erstwhile Ranbaxy, Asian Paints, BlowPlast, ABC Consultants and Asia Online.

Kannan had joined the company from BSE and was in charge of business development. Kumar, who looked after strategy and worked to bring customer centricity as the Tata group's focus area, was earlier professor of marketing at the London Business School.

On Monday, when the ouster of Mistry by the Tata Sons board was announced, the GEC was also disbanded. Soon after, Tata Group's website removed all the details related to the GEC, including profile of the members.

It has been speculated that Mukund Rajan and Harish Bhat, others on the five-member GEC would be offered new roles within the group.

Mistry met PM on Thursday, Tata on Friday

The Times of India reported on Sunday that Mistry met PM Modi on Thursday while Tata met him on Friday. Both of them is learnt to have discussed the developments at the group separately.

The government has said it is observing the developments at the dollar 100 billion group but has not yet stepped in.

Stormy board meets, bitter battles ahead

The Business Standard reported that 13 major group companies are yet to declare results and Cyrus Mistry is still chairman of most of them.

In such a situation, the board meets to discuss earnings are going to be stormy, especially in the backdrop of the allegations levelled by Mistry in the letter to Tata Sons board, the BS report said.

The focus has now shifted to a bigger question: Will Mistry quit the other company boards or plan to fight it out.

The Hindu Business Line has meanwhile reported citing insiders that "if Mistry contests his ouster, his exit from the group companies, too, would get entangled in the legal process". The report said the only way out for the companies will be to call an extraordinary general meeting to discuss the ouster.

A report in Mint has said that both the factions have readied a PR battle too against each other.

All in all, the mess seems to have just got all the more messier.

Tata Steel NCD ratings downgraded:

Citing "heightened management risk" following the ouster of Mistry as Chairman of Tata Sons, Brickwork Ratings has revised outlook of Tata Steel to negative while as revised the ratings of its NCDs worth Rs 6,500 crore.

The revised rating however continues to place the company in the 'high degree of safety' category with regard to the services to debt.

"Brickwork Ratings revises rating to 'BWR AA' (BWR Double A) with Negative Outlook from BWR AA+ (BWR Double A Plus), (Outlook: Stable) for unsecured the Non-Convertible Debenture (NCDs) Issues of Rs 4,000 crore," said a regulatory filing issued by Tata Steel.

Brickwork Ratings also revises rating to 'BWR AA-' (BWR Double A Minus) Outlook: Negative from BWR AA (Outlook: Stable) for the unsecured subordinated perpetual Debt Issues of Rs 2,500 crore of Tata Steel Ltd, it added.

"Essentially the Rating reflects heightened management risk and the current stage of lack of clarity at group level management that may impact strategic decision making at Tata Steel Ltd," Brickwork said.

Tata Steel's gross debt rose to Rs 85,475 crore at the end of the June quarter of the fiscal, from Rs 81,975 crore in the year-ago period, mainly due to increase in India and Tata Steel Global procurement. Its net debt also rose by Rs 4,171 crore to Rs 75,259 crore during the same period.

In a same regulatory filing, Tata Steel said as part of review by Brickwork Ratings, the agency on October 27, 2016 revised Tata Steel Ltd's credit rating to BWR AA from BWR AA+ for NCD and BWR AA- from BWR AA for the perpetual debt, with a negative outlook.

"While the company clarified its position vide its press release dated October 27, 2016, according to Brickwork, the ratings change has resulted due to the uncertainty consequent to the recent change in top management at Holding Company/ Group Level which could slow down vital decisions such as cost cutting and deleveraging the Balance sheet concerning the unprofitable UK operations and restructuring of the European business," it added.

Meanwhile, the Hindu Business Line has reported, citing Tata officials that Mistry has started moving out of Bombay House. The report said the ousted chairman has started moving his files and other personal belongings from the building. He has even stopped visiting the iconic building on a regular basis, the report said.

(With PTI inputs)

Updated Date: Nov 01, 2016 10:19 AM

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