Tata faces losses of $18 billion

Mumbai: The erstwhile chairman of the Tata group said that the losses of the various Tata flagship companies like Tata Motors, Tata Power  Sons Ltd, on a fair value could potentially result in a write down over time of about Rs 1,18,000 crore.

He said this is what he inherited when he took over as chairman. “ln the face of the above challenges, I had to take many tough decisions with sensitive care for the group’s reputation as well as containing panic amidst internal and external stakeholders,” he said in a stinging email to the Tata Son’s Board and the Tata Trusts.

Mr Mistry who  was sacked without any notice  said  the  telecom   business   has  been  continuously haemorraging. “If we were to exit this business via fire sale or shut down, the cost would be $4-5 billion. This is in addition to any payout to DoCoMo of at least a billion plus dollars.” In the case of Tata Power losses alone amounted to Rs 1,500  crore and given  that Mundra constitutes Rs 18,000 crore (40 per cent of capital employed) this substantially depresses the return on capital   for Tata Power as well as carries the risk of considerable future impairment.

Tata  Motors was even more challenging. Before 2013, in order to shore up sales and market share, Tata Motors Finance extended credit with lax risk assessment. As a result, the NPAs mounted in excess of Rs 4,000 crore.

Historically, the company had employed aggressive accounting to capitalise substantial proportion of the product development expenses, creating a future liability.

Beyond this, the Nano product consistently lost money, peaking at Rs 1,000 crore. As far as the aviation business with which he said he had to go along with despite his reservations. 

A recent  forensic  investigation  revealed  fraudulent transactions of Rs 22 crore  involving  non-existent  parties in India and Singapore.  Executive  Trustee,  Mr. Venkatraman, 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  or  whom  immediately   submitted  his resignation,  that the board decided  to belatedly file a FIR.