Mistry screams ‘fraud’ in Tata-Air Asia JV
27 Oct 2016 10:34 PM GMT
Flagging “ethical concerns” in Tata group’s aviation joint venture with Air Asia, ousted Chairman Cyrus Mistry has alleged that forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent entities in India and Singapore.
As the bitter war played out between him and interim Chairman Ratan Tata, Mistry also alleged that due to the latter’s passion for aviation, Tata Sons board increased capital infusion in the aviation sector at multiple levels of the initial commitment.
In a letter written to the Board members of Tata Sons a day after he was ousted, Mistry said: “Board members and trustees are also aware that in the case of Air Asia, ethical concerns have been raised with respect to certain transactions as well as overall prevailing culture within the organisation.
“A recent forensic investigation revealed fraudulent transactions of Rs 22 crore involving non-existent parties in India and Singapore.”
Mistry went on to allege that “executive trustee Mr Venkataraman, who is on the board of Air Asia and also a shareholder in the company, considered these transactions as non-material and did not encourage further study”. It was only at the insistence of the independent directors, one of whom immediately submitted his resignation, that the board decided to belatedly file a first information reports, Mistry said in the letter.
He claimed it was Tata who completed negotiations with Air Asia but early in his tenure as the Chairman of Tata Sons he was asked to table a proposal for the JV with Air Asia at a Tata Sons board meeting.
Claiming that in the case of JV with Air Asia, he was able to extract a “promise of no debt to be raised at the level of JV, as well as limiting Tata Sons investment to 30 per cent of the $30 million equity”, Mistry said he was taken by surprise with a similar situation when Tatas formed a JV with Singapore Airlines. “A few months later, I was surprised to be confronted with a similar situation requiring me to execute a fait accompli JV with Singapore Airlines,” he said.
Mistry further said in the letter, “without the benefit of time and experience to fully evaluate the proposal, I had to accept that Tata Sons would take a 51 per cent stake in a $100 million joint venture”. Pointing fingers at Tata, he said: “The passion for the airlines sector has led Mr Tata to continue his involvement with strategy of the two airlines. It is on his advice that the Tata Sons board has increased the capital infusion in the sector at multiple levels of the initial commitment.” In 2013, Tata Sons had joined hands with Malaysian carrier AirAsia and Arun Bhatia’s Telestra Tradeplace to start low cost carrier AirAsia India.
The carrier had to wait for nine months before taking off.
In September 2013, Tata group had joined hands with Singapore Airlines to start a new full-service airline in India, 18 years after a failed attempt. Tata Sons owned 51 per cent stake in the carrier, which has been christened as Vistara with Singapore Airlines holding the rest.
Exchanges seek clarification from Tata Group firms on Cyrus letter
In a fresh turn of events in the Tata-Mistry saga, leading stock exchanges BSE and NSE on Wednesday sought clarification from various listed companies of Tata Group about purported disclosure by the ousted chairman about $18-billion possible writedown at these firms.
The exchanges have asked these companies, including Tata Motors, Tata Steel, Indian Hotels, Tata Teleservices and Tata Power, to provide full details about these issues. The notices from the stock exchanges followed reports about Cyrus Mistry, who was ousted as the chairman of the group’s main holding company Tata Sons, disclosing possible writedown to the tune of $18 billion faced by the conglomerate. The exchanges have asked the companies to provide “clarification/confirmation on the news item in detail”.
The companies have also been asked to explain “whether such event/negotiations/article stated in published news were taking place? “If so, you are advised to provide the said information along with the sequence of events in chronological order and the material impact of this article on the company,” the exchanges said.
‘Tatas not shutting loss-making Nano due to emotional reasons’
Tata Motors has been unable to shut down the loss making small car Nano due to “emotional reasons” and doing so would also stop the supply of “gliders” to an entity that makes electric cars in which Ratan Tata has a stake, Tata Sons’ ousted Chairman Cyrus Mistry has alleged.
In clear indications that not all was well between him and Tata, Mistry in his letter to Tata Sons board members said for the group’s automotive venture Tata Motors to make a turn around the company needed to shut down the Nano -- a pet project of his predecessor.
“The Nano product development required concept called for a car below Rs 1 lakh but the cost were always above this. This product has consistently lost money, peaking at Rs 1,000 crore,” Mistry said in his letter written a day after he was ousted as the Chairman of India’s largest conglomerate.
He further said: “As there is no line of profitability for the Nano, any turnaround strategy for the company (Tata Motors) requires to shut it down. Emotional reasons alone have kept us away from this crucial decision.” Moreover, raising issues of conflict of interest, Mistry 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 Mr Tata has a stake.”
Tata’s dream project Nano came alive in January 2008 when it was launched at a ‘promised’ price tag of Rs 1 lakh, which was then the cheapest car in the world. However, the car faced setbacks one after another. Tata Motors had to shift the manufacturing plant of the car from its original site at Singur in West Bengal due to farmers’ opposition led by Trinamool Congress to Sanand in Gujarat.
Although the company had managed to roll out the car from its new location, initial instances of the car catching fire raised many safety issues. It could never live up to its potential, with Tata even admitting that Tata Motors had made a mistake of marketing Nano as the cheapest car.
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