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14
December 2016
Tata Sons (The Total Investment & Insurance
Solutions)
Nusli Wadia, Chairman of the Wadia
Group, has raised serious question on financial and strategic information
sought by the Board of Tata Sons and Ratan Tata as Trustee of Tata Trusts,
which he says 'could be regarded as violation of the insider trading
regulations'. Mr Wadia, who is Independent Director on the Board of Tata
Motors, also called Mr Tata's pet project, the 'Nano' as serious drain on the
company's financial resources.
In a letter to shareholders of Tata
Motors, Mr Wadia says, "I believe that Mr Tata and the Board of Tata Sons
even post notification of the insider trading regulation (15 January 2015)
sought access to information and documents of Tata Steel, Tata Motors and other
Tata companies. It is alleged that in addition, they have demanded that the
senior members of the management brief them and make presentations to them on
various business proposals and activities from time to time." The Total Investment
& Insurance Solutions
According to Mr Wadia, on 24
February 2015, Tata Sons' Chief Legal and Group General Counsel, Bharat Vasani
sought advice from a senior counsel for passing of a resolution by the Board of
Directors of Tata listed companies to enable them to authorise the managements
to pass on or present financial information or strategic presentations to the
Board of Directors of Tata Sons. The Total Investment & Insurance
Solutions
"I believe that this opinion
was sought at the insistence of Mr Ratan Tata and Mr Soonawala, Trustees of the
Tata Trust. The opinion was obtained by Tata Sons in June 2015 and sent to me
by Mr Vasani in February 2016 to persuade me to agree and be a party to the
resolution to provide information outlined in the opinion to be passed by the
Boards of the companies where I serve as an Independent Director, including
Tata Motors. I did not agree with the Counsel's advice and no Board resolution
was presented to or passed by the Board of Tata Steel," he added.
Tata Motors has called for an
extraordinary general meeting (EGM) to remove Cyrus P Mistry and Mr Wadia as
Directors from the company Board. The Independent Directors of Tata Motors,
through their meeting on 14 November 2016, emphasised on the collective
responsibility of the Board by stating all decisions taken by the Board with
regards to strategy, operations and business have been unanimous and executed
by Chairman and Management accordingly.
Bengaluru-based InGovern Research
Services, which provides proxy voting advisory has recommended to vote against
the proposal to remove both Mr Mistry and Mr Wadia as Directors of Tata Motors.
Especially talking about the removal of Mr Wadia, the proxy voting advisory has
said, "Tata Sons proposes his removal not because of his long tenure but
because he has expressed an opinion in Tata Motors that is contrary to theirs.
By stating that he is acting in concert with Mr. Mistry, Tata Sons has
challenged the position of the Independence Directors. Promoters removing
Independent Directors who do not agree with their views also sets a bad
precedent for Indian corporate governance. In case Tata Sons believes that Mr
Wadia’s independence has been affected, it should also propose removal of all
the Independent Directors of these companies with longer tenures." The Total Investment
& Insurance Solutions
Nano
is a drain on Tata Motors
In his letter, Mr Wadia has also
highlighted poor performance of Tata Nano, which according to him 'is a serious
drain on the finance of the company, in addition to creating a very negative
image of Tata Motors' passenger vehicle business (PVB)'. "Even at a price
of Rs2.25 lakh, the car neither sells nor is viable as every sale of the
vehicle is at a substantial loss to the Company. After its commercial failure
which became evident not too long after its launch, I differed strongly in its
continued operations and funding. Huge losses have been incurred over the
years. The plan on which the investment was made was for 250,000 cars while the
production in the year 2015-16 was in the region of 20,000 cars and presently
far less. The delay in the closure of NANO is a serious drain on the finances
of the Company. The investment and losses on NANO have been in thousands of
crores rupees. Concerns have been raised not only by me but by several others
regarding the continuing operation," Mr Wadia says.
Sell
unproductive stake in group companies
The Wadia group chief also suggested
Tata Motors to sell its stake worth Rs8,600 crore in non-listed companies like
Tata Sons, Tata Projects, Tata Industries, Tata Services, Tata International
and Tata Capital as well as listed units like Tata Chemicals and Tata Steel.
"Including current value of the listed shares at about Rs200 crore, the
stake of Tata Motors goes to Rs8,800 crore. These cross holdings are being
maintained in a debt ridden company only to indirectly keep the voting rights
and control in Tata Sons. The figure across all the listed companies holdings
in Tata Sons is round 14% of its capital amounting to about Rs70,000 crore and
is being maintained only to shore up the voting rights of the Tata
Trusts."
Advising shareholders to get rid of
this unproductive shareholding, Mr Wadia, says, "It is for you the
shareholders who own around 70% of the company to decide as to whether it is in
your best interest to hold the shares worth Rs8,800 crore with no return or to
disinvest, and pay off an equivalent debt and save interest of about Rs800
crore, thereby improving the profit of the company by the same amount." The Total Investment
& Insurance Solutions
Ratan
Tata's behaviour 'inappropriate'
Mr Wadia has been on Board of Tata
Motors since 1998, or for over 18 years. He says, over the years, as an
Independent Director, he has expressed his views and differed with several
proposals during the time of Mr Tata's Chairmanship. Even as an Interim
Chairman of Tata Sons, Mr Tata's behaviour is 'inappropriate', Mr Wadia
says. The
Total Investment & Insurance Solutions
The Wadia group chief also raises
serious questions on the meeting between union leaders from Tata Motors' Pune
plant and Mr Tata. "Following that meeting the Union decided to take an
adverse stand with regard to the Management. The Board was further informed
that a letter had been addressed to the Managing Director on the 11th November
in which it was stated that '...The employees of Tata Motors Pune Plant have
been deeply concerned over the rift between Tata Sons and the leadership of
Tata Group companies. Moreover, the once cordial relation between the Tata
Motors Pune Plant management and the employees has taken a downward turn since
last 14 months over various negotiable issues. However, during this time of
turmoil we reiterate our complete and dedicated commitment to the decision
taken by Mr Ratan Tata over the change in the leadership of Tata Sons
Ltd...'."
The Total Investment & Insurance Solutions
Mr Wadia says, "A Memorandum
was also handed over by the leaders on the same day to Mr Tata. An Agreement
that was initialled with the union after 14 months of discussion and
negotiation where for the first time in the history of Tata Motors Pune a productivity
linked settlement was initialled and to be signed. It is now a matter of
conjecture as to whether this agreement will be signed or not. These actions on
the part of Mr Tata 'by galvanizing' the union and 'acting prejudicially
against the interest of your company may put the company and its future in
great jeopardy and impact the overall moral of the workers, employees and
management of Tata Motors'." The Total Investment & Insurance
Solutions
"It is for you the shareholders
of your company to determine as to whether they wish that their company to be
governed or should I say misgoverned in such a manner? They should judge
whether these actions are in conformity with elementary principles of good
Corporate Governance and meet even the basic standards of ethics and morality
expected of Tata Sons," Mr Wadia concluded.The Total Investment
& Insurance Solutions
