In an independent directors board meeting on Monday, scheduled at the Bombay House — the iconic headquarters of the Tata group in Mumbai...
In an independent directors board meeting on Monday, scheduled at the Bombay House — the iconic headquarters of the Tata group in Mumbai – Nusli Wadia, an independent director on the Tata Motor Board, who supported the ousted chairman of Tata Sons, Cyrus Mistry will likely face a backlash from the group. Besides Wadia other five independent directors on the Tata Motors board are: R A Mashelkar, Subodh Bhargava, Nasser Munjee, V K Jairath and Falguni Nayar will also be at the meet.
According to a source on the board reported that seventy-two year-old Wadia, who is also the chairman of the Nomination and Remuneration Committee of Tata Motors, submitted a good report based on the track record of Mistry as the chairman of Tata Motors. Other independent directors like Munjee, supported Mistry too.
The independent directors of Indian Hotels, Munjee and Bhargava too gave their full support to the former chairman Mistry’s leadership at the Tata chemicals and Tata Steel board meetings held on Friday. Indian Hotels and Tata Chemicals had issued a statement in his favour to the stock exchanges in their fiduciary duty towards rest of the shareholders, but in case of Tata Steel, three of the six independent directors were against issuing a statement and were split. Tata Sons sought another general meeting of shareholders to oust Mistry and Wadia from the Tata Motor board.
Cyrus Mistry who had been Tata’s Chairman for four years, just after being abruptly removed from his role on October 24 for non-performance wrote an e-mail to the board of group holding company Tata Sons Ltd., highlighted that the company is facing the massive losses because of Ratan Tata’s pet project Nano and other legacy issues. Although the company is facing a huge loss over the car, it has been kept alive due to the ’emotional reason’, Mistry said.
“The board was concerned about the Nano and we had discussed several options as it was losing money on every car and the inventory was only piling up. After sinking in Rs 6,000-7,000 crore in the Nano till date, what are the returns for the shareholders?” a Tata Motors director said. “The entire board is the owner of the decisions and not Mistry alone. If he is removed for underperformance then the entire board should be sacked,” he added.
In a meeting with Tata Sons board of directors, Mistry hinted about the challenging situation both on the commercial vehicles and passanger vehicles. “Beyond this, the Nano product development concept calls for a car below Rs 1 lakh, but the costs were always above this. This product has consistently lost money, peaking at Rs 1,000 crore. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires shutting it down,” Mistry had said. “Another challenge in shutting down Nano is that it would stop the supply of the Nano gliders to an entity that makes electric cars and in which Tata has a stake,” Mistry had said.
Before 2013, in order to shore up sales and market share, Tata Motors Finance, a subsidiary of Tata Motors, had extended credit with lax risk assessment. As a result, the company’s bad loans mounted to being in excess of Rs 4,000 crore, Mistry had said. The Tata group said the success of JLR should also be credited to Tata when the Mistry camp is accusing him of “legacy issues.”