The former chairman of Tata group Cyrus Mistry and his family claimed on Friday that the salt-to-software conglomerate has fared better during his time, compared to the three years of the present chairman N Chandrasekaran. Mistrys said in a Supreme Court filing that the operating loss of Tata Sons (excluding TCS, the most profitable company in the group) has increased by 282 per cent to Rs 2,100 crore in 2019, compared to Rs 550 crore in 2016, when Cyrus Mistry was removed.
Mistrys alleged that the abysmal performance in recent years was due to legacy issues. They said that Tata had earlier sought to exclude the dividend received from the TCS to arrive at an operating profit of Tata Sons in a bid to discredit Mistry's performance. In the same yardstick, the net loss of Tata Group (excluding TCS) at Rs 13,000 crore in 2019 was the worst in three decades, they said in a filing to Supreme Court.
Tata group annually outperformed the BSE Sensex by 5 per cent in terms of market capitalisation during Mistry's time. Likewise, there has been an annual increase in group companies' post-tax profits at 34.6 per cent during his three years, they claimed. The standalone borrowing costs in Tata Sons increased by 92 per cent to Rs 2,776 crore in 2019 from Rs 1,453 crore in 2016.
Post-Mistry, the group-level debt of Tatas rose by Rs 80,740 crore in just two years compared to a comparatively lower figure of debt increase by Rs 69,877 crore over the previous four years, they said. "The conversion of Tata Sons into a private limited company would also cause the cost of debt to increase," they said.
"In the last three years, Tata Sons invested about Rs 67,000 crore in portfolio companies. The value of these investments has already eroded by approximately Rs 40,000 crore. Although a significant erosion happened in the telecom ventures, the performance of the other investment decisions has been questioned. The value of the listed non-telecom investments during this period eroded by 23 per cent to Rs 16,243 crore while during the same period the BSE Sensex grew by 27 per cent," they said.
The Supreme Court will start hearing the matter once the filings from both the sides are over. In January, the apex court had stayed the National Company Law Appellate Tribunal (NCLAT) order which asked the 150-year-old group to reinstate Mistry as chairman. Mistry has also appealed to the Supreme Court against the NCLAT order, saying that the appellate tribunal hasn't granted judicial protection to the Mistry family under the minority shareholder rights. Mistrys are the second largest shareholder in the holding company Tata Sons, after Tata Trusts.
The legal battle between industrialist Ratan Tata and Cyrus Mistry is likely to be pivoted on the rights of Mistry family to own board position in Tata Sons. After the removal of Mistry from the post of chairman, his family had also lost the board position which they were holding since 1980s. The Supreme Court has recently admitted Mistry's appeal, which sought representation for his family on the board of Tata Sons.
Tata lawyers argue that the board position, which the Mistry family was holding is not an entitlement. "They have been perceived as financial investors in Tata Sons," said a source earlier. Tatas will also fight that the Cyrus Mistry firms do not have substantial interest in Tata Sons as claimed by them. "Mistrys hold just 2.17 per cent of the issued share capital of Tata Sons," he said. In total, the Mistry family holds 18.37 per cent stake including issued equity capital and issued preference capital.
Tata group has been struggling in the recent months after the spread of coronavirus pandemic and the resultant lockdowns. Chairman Chandrasekaran recently said that the group is in a strong financial position with adequate cash flows to support group companies as well as new growth initiatives. He added that it is not looking to monetise investments to raise capital.