Cyrus Mistry, who was unceremoniously removed as the chairman of Tata Sons alleging non-performance, in an affidavit to the Supreme Court on Friday said the Tata Group had an adjusted net loss of Rs 13,000 crore in 2019 — the worst losses in three decades.
In his reply to the Tatas’ petition challenging his reinstatement by the NCLAT last December, Mistry also demands that group chairman emeritus Ratan Tata should reimburse all the expenses to Tata Sons since his departure in December 2012 in keeping with best global governance standards.
Early January, the Tatas challenged the December 18, 2019, order of the National Company Law Appellate Tribunal (NCLAT) in the Supreme Court, which had stayed the order. Then the apex court on May 29 began hearing on the case and asked all parties concerned to submit their replies within four weeks.
The Mistry family firms filed replies in response to Tatas’ affidavits on Friday. Mistry was unceremoniously removed as the chairman of Tata Sons on October 24, 2016, in a boardroom coup offering no reason. But later in select press statements the group had claimed that Mistry was removed primarily for his non-performance and claimed that Tata Sons was in loss under his watch.
But, according to Mistry, the loss numbers were arrived at by excluding the huge dividend that the group cash-cow TCS was paying, which was averaging at over 85 per cent annually.
“The Tatas had sought to exclude the dividends from TCS to arrive at operating profit in a bid to discredit my performance. Applying the same yardstick, the adjusted profit after tax (excluding profit from TCS) stood at a negative Rs 13,000 crore in 2019 for the Tata Group, which is the worst loss in three decades,” Mistry says in his replies to the Supreme Court.
He also says Tata Sons had a 282 per cent increase in operating losses in 2019 at Rs 2,100 crore, up from around Rs 550 crore in 2016 and blames it for “the abysmal performance in recent years to legacy issues”.
Mistry also questions the belated claim by the Tatas that his inexplicable removal was due to lack of performance, pointing to the unequivocal endorsement of his performance by the nomination & remuneration committee which was duly approved by the board just weeks before his dramatic removal.
Emphasising that his removal had nothing to do with his performance, Mistry’s reply highlights that the Tata Group had annually outperformed the Sensex by 5 percent in terms of market capitalisation when he was the chairman.
Mistry also says the group companies had logged in 34.6 per cent growth in annual net income in the first three years of his tenure and a 100 per cent rise in the patent filings, all leading to a USD 5 billion gain in brand value.
The plea also seeks full disclosure of the expenses of Ratan Tata’s office as these are related party transactions.
“It was hoped that in keeping with the global best practices in corporate governance, Tata would reimburse his expenses over the past five years as was done by Jack Welch, the chairman emeritus of GE, reimbursed all his expenses to the company.” Post-Mistry, the Tata Group’s debt rose by Rs 80,740 crore in just two years compared to Rs 69,877 crore in the previous four years when he was the chairman.
The conversion of Tata Sons into a private limited company would also cause the cost of debt to increase, he says, adding the standalone borrowing cost of Tata Sons jumped 92 per cent to Rs 2,776 crore in 2019 from Rs 1,453 crore in 2016.
Similarly, employee expenses in the first three years of his chairmanship rose only by Rs 96 crore, which under the new management jumped by Rs 210 crore over a similar timeframe.
He also notes that the company has seen huge value erosion of the investments when Tata was the chairman. In the past three years, Tata Sons invested about Rs 67,000 crore in portfolio companies but these investments have lost Rs 40,000 crore of the invested value.
Though most of it was due to telecom ventures, the value of the listed non-telecom investments lost 23 per cent to Rs 16,243 crore, while during the same period the Sensex rallied 27 per cent, underperforming the index by 50 per cent.
Mistry also says when Tata was the chairman, the group had no proper investment strategy and that no strategy document ever presented to the board during his tenure.
“All that one saw was mere a set of ill-conceived global acquisition and bad decisions on choice telecom technology platforms, and other business decisions all led to the largest value destruction in Indian corporate history.
“These prejudicial actions led to the dividend yield from Tata Sons falling from around 0.26 per cent in 2005, the first year of the listing of TCS, to a paltry 0.06 per cent in 2019, when dividend yield of Sensex companies was around 1.4 per cent,” he says.
Seeking to hold the trustees of the dozen-odd Tata Trusts responsible for the mess at the group now, Mistry says he has evidence to prove that some trustees were involved in all major decisions and the same led to other shareholders getting negatively impacted. “Its time the trustees are held accountable.”