Mumbai: Ahead of an extraordinary general meeting (EGM) of Tata Motors Ltd on Thursday, industrialist Nusli Wadia has written to the company’s shareholders highlighting the inappropriate actions of Ratan Tata and promoters of Tata Sons Ltd.
Wadia said he has chosen not to attend Thursday’s meeting calling the group’s recent EGMs as “inappropriately and shamefully stage managed”.
Wadia was removed as an independent director from the board of Tata Steel Ltd late on Wednesday with a majority of both institutional and retail investors voting against him at an EGM. He now faces a similar test in Tata Motors on Thursday and Tata Chemicals Ltd on Friday.
The four-page letter to Tata Motors shareholders, dated 21 December, spoke of attempts by Tata Sons to influence independent directors and the board of Tata Motors by way of using unsigned legal opinions. The legal opinions were circulated just hours before a company board meeting to “influence, intimidate and muzzle the independent directors from communicating with the stock exchanges”.
He wrote about the company’s ill-conceived investment in low-end passenger car Nano and the delay in its closure leading to a serious drain on the finances of the company. Wadia said every sale of Nano was at a substantial loss to Tata Motors, with total losses on the model running into thousands of crore.
Wadia said that it was the first time in the history of the automaker’s Pune unit that a productivity-linked settlement was agreed, initiated and was to be signed with the union after 14 months of discussion but Tata met the union and asked them to support his move and that of Tata Sons.
“The union subsequently issued a statement that their relationship with the management of the company had taken a downward trend over the issues. This irresponsible action galvanizing and acting prejudicially against the interest of your company may jeopardise its future and impact the overall morale of all the workers and employees of Tata Motors.”
The letter highlighted the negative impact over the years on Tata Motors’ passenger vehicle business due to issues in design, product, quality, execution and high costs “being directed from the top”. “The division has high capital employed, high level of loss that impacts overall financials of the company,” he wrote.
Wadia also wrote about the cross-holdings of Tata companies, the largest of which, he said, was Tata Sons valued at Rs8,600 crore. He reiterated that the cross-holdings are being held in a debt-ridden company to keep voting control over Tata Sons. “The listed companies as a whole have blocked approximately Rs70,000 crore in holding Tata Sons shares equivalent to 14% of its capital with the sole purpose of shoring up the voting rights of Trust.”
“It is for you the shareholders of Tata Motors who own 70% of the shares of your company to decide whether you want to be the holder of Tata Sons shares with minimum return, zero liquidity and no exit,” he wrote.
“What is at stake now is not whether I am removed or not but the fate of the very institution of the independent director that has been created in law and by Sebi (capital markets regulator Securities and Exchange Board of India) to safeguard the interests of all stakeholders,” the letter said.
On Wednesday, Wadia had said that the ability of promoter Tata Sons to seek removal of independent directors from group company boards could force them to either “toe the line, resign or face removal”.
Tata Sons in November said it had sought removal of Wadia as the director of Tata Steel, Tata Motors and Tata Chemicals. Tata Sons controls 26.51% of Tata Motors, 29.75% of Tata Steel, and 19.35% of Tata Chemicals. Wadia, on the other hand, has served as an independent director in Tata Motors for over 18 years and for 37 years in Tata Steel. Earlier this month, Wadia has filed a Rs3,000-crore defamation suit against Ratan Tata and the board of Tata Sons.