Tatas In Turbulence

Updated: Dec 29 2002, 05:30am hrs
It was a turbulent year for the 124-year-old Tata group, which came under heavy fire for allegedly flouting corporate governance in the Tata Finance Ltd (TFL) case. The upsides were the acquisition of VSNL, plans to take Tata Consultancy Services public and the success of the Indica.

TFL, which filed a Rs 424 crore civil suit in March against its former managing director D S Pendse, is seeking damages for his role in irregularities committed in the company. The civil suit sparked reports that other senior officials were also involved in Mr Pendses deals. These allegations were backed by the findings of an internally commissioned report from an A F Ferguson (AFF) team headed by Y M Kaleon TFL irregularities. But the Tatas were not satisfied. AFF withdrew the report, sacked Mr Kale and re-commissioned a new report. The corporate world and audit circles were critical.

A further blow was dealt when the Mumbai Polices Economic Offences Wing (EOW) reported that Mr Pendse had committed no criminal acts. Tata stocks fell during the period, though they recovered later. The Tatas proceeded to launch legal action against Mr Pendse in New Delhi. The civil case against Mr Pendse will be heard early next year; meanwhile, the EOWs findings are also being contested in court.

TFL has been posting continuous losses throughout the fiscal and is opting out of all non-core businesses. It has already injected Rs 100 crore into the company and plans to inject a further Rs 200 crore.

When, after acquiring VSNL, the Tatas decided to invest Rs 1,200 crore of VSNL funds in a 25 per cent stake in Tata Teleservices, Union minister for communication and parliamentary affairs Pramod Mahajan termed it as asset stripping and intervened. It was later decided that VSNL would invest Rs 836 crore in TTSL over seven years and a further Rs 636 crore over four years. But the acquisition of VSNL allows the Tatas to enter into ILD, NLD, giving it access to more than 8 lakh subscribers.

The Indica retains its leadership in the B-segment. Telco has also launched its sedan, the Tata Indigo. But the company faces competition from M&Ms Scorpio and the new Toyota Qualis. In response, Telco has launched a premium end Safari, but it remains to be seen how this translates into volumes. LCV sales were encouraging, especially as this segment witnessed negative growth last year. The Tata Indiva was unveiled at the 72nd Geneva International Motor Show.

Tata Power saw a change of guard, with Firoz Vandrewala taking over as managing director after Adi Engineer retired. The company also transcended its boundaries of power generation to implement 1,200 km transmission lines and forayed into distribution in New Delhi.