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.
