In a major embarrassment for Ratan Tata and Tata Sons, the independent directors on the board of Indian Hotels Company (IHCL) on Friday lauded the leadership of chairman Cyrus Mistry and his strategic direction.
Ahead of an IHCL board meeting on Friday, the directors expressed full confidence in Mistry’s performance, appreciating the steps taken by him to run the company.
The directors included Deepak Parekh, Vibha Paul Rishi, Gautam Banerjee, Nadir Godrej, Keki Dadiseth and Irena Vittal.
A statement to the BSE read, “Taking into account Board assessments and performance evaluations carried out over the years, the Independent Directors unanimously expressed their full confidence in the Chairman, Mr Cyrus Mistry, and praised the steps taken by him in providing strategic direction and leadership to the Company.”
Mistry was ousted as chairman of Tata Sons on October 24 and according to media reports, the Tata Group’s holding company is looking to remove him as chairman of group companies. Tata Sons had said in a statement the tenure of the former chairman was “marked by repeated departures from the culture and ethos of the group”.
Mistry, who took over as Tata Sons chairman in December 2012, has been credited with turning around the operations of IHCL, which runs the Taj chain of hotels. Under Ratan’s Tata watch, IHCL bought a string of hotels across countries including the US, UK and Australia, several of which failed to perform and had to be later sold off. In FY10, the company reported the biggest loss till then of Rs 136.9 crore and the firm’s net debt to equity was 1.5 times, up from 1.33 times in FY09.
A JP Morgan report in June 2010 had observed that the high-cost renovation of a marquee property (Pierre in New York) coupled with leverage has adversely impacted company’s international business over the last few years. “While the overseas operations account for around 20% of revenue, IHCL has consistently been making losses here last 2-3 years,” the analysts observed.
Major holders as of September 30, 2016
In the quarter ended September 30, 2013, IHCL reported a loss of Rs 433.4 crore — its biggest ever quarterly loss — after it wrote off Rs 370 crore for its 6.9% cent stake in Orient-Express, which was acquired during Ratan Tata’s tenure.
Reputed tax and corporate affairs expert HP Ranina observed on a television channel on Friday that Mistry could not be removed as chairman unless the majority directors of the board decided to do so. Ranina noted that nobody, not even the owner, can interfere in the affairs of the company. “This is not is what is expected of the Tatas,” Ranina said.
While Tata Sons has a 39% stake in IHCL , Life Insurance Corporation holds around 8% and GIC about 3%. Foreign portfolio investors have a stake of approximately 14% while mutual funds hold 11%.
In an email late last month, Mistry had pointed out that the capital employed in IHCL, the Tata Motors’ passenger vehicles unit, Tata Steel Europe, Tata Power Mundra and Tata Teleservices between 2011 and 2015 had risen from Rs 1,32,000 crore to Rs 1,96,000 crore due to operational losses, interest and capex. This figure, the email said, was close to the net worth of the group, at present Rs 1,74,000 crore. A realistic assessment of the fair value these businesses, it said, could potentially result in a writedown over time of about Rs 1,18,000 crore.