Companies & Sectors
Tata Wars: PR, Plants and Philanthropy
When it comes to fighting for internal control, Ratan Tata finds no use for the much-touted ‘Tata culture’. Values, equity and fair-play quickly go for a toss and in come whisper campaigns, innuendo and falsehoods, on par with the worst in the country, lubricated through expensive public relations (PR) and large advertising budgets. I watched it closely in the 1990s while reporting the humiliating removal of Russi Mody, Ajit Kerkar and Darbari Seth and then, again, over the Tata Finance episode when YM Kale, a highly regarded senior partner at the accounting firm of AF Ferguson, was ignobly sacked by his firm (in order to retain the Tata business) because his 904-page special audit did not give Tatas the clean chit they expected. 
 
The Niira Radia tapes, published by Outlook and Open magazines, among others (and still available on the net), provided the world a ringside view into how Ms Radia skilfully manipulated the media, politicians and bureaucrats through a series of trade-offs, loans and land deals for her corporate clients (primarily the Tata group and Reliance). Cyrus Mistry’s latest riposte to Tata Sons (specifically, the belated full-page advertisement attempting to explain the disgraceful boardroom coup to sack Mr Mistry) tells us that Ms Radia’s work through Vaishnavi Communications cost a cool Rs40 crore per annum. 
 
Even before one digests this huge PR budget, one learns that Rediffusion-Edelman is being paid a whopping Rs60 crore per annum for PR support to Tata Sons as well as the Tata trusts. What exactly does this kind of money buy? Quite simple. It ensured that the 2G-telecom scandal and the machinations of the group, led by Ratan Tata, were soon forgotten. How else does one explain the shock and many allusions to ‘damage to the Tata brand’ that greeted the crude sacking of Cyrus Mistry? One must remember that this expensive PR machine is at work again in the Mistry-Tata war and investors need to analyse news reports carefully, to get to the truth. 
 
Tata Sons’ Guarantees
A pink paper recently reported that Tata Sons may no longer guarantee loans, refinancing deals or funding requirements of group companies where Cyrus Mistry refuses to step down as chairman. Unnamed executives were quoted as saying, “Units that don’t adhere to the values and policies of Tata Sons cannot be supported with the comfort of Tata assurance, top executives.” It further says that this message about guarantees is ‘likely to be conveyed at the EGMs’ (extraordinary general meetings) convened to oust Mistry. It further quotes unnamed bankers saying, “If Tata Sons decides not to renew guarantees, borrowing costs could jump significantly for group companies and make their loans more costly.”
 
Almost in tandem, the Tata director on Tata Chemicals, Bhaskar Bhatt, requested Cyrus Mistry to step down as chairman, because of the “threat the company faces on account of loss of confidence of the promoter Tata Sons in the Chairman of Tata Chemicals.” He added to the drama by tendering his resignation; this would have been relevant if he were an independent director, rather than a group company head and Tata nominee on the board. There is a nice sequencing to this, with the subsequent event appearing to confirm the media narrative and reinforcing public opinion. 
 
How true is the threat about Tata Sons’ guarantees? We learn that the only companies where Tata Sons has stuck its neck out by providing a direct guarantee of sorts is the controversial TTSL (Tata Teleservices Limited). There, too, it is against a pledge of shares. In any case, TTSL, like TCS, is a company where Tata Sons is in a position to remove Mr Mistry as chairman.
 
Sources close to Cyrus Mistry say that, during his tenure, bankers were specifically told to look at each group company on merit. Having said that, they agree that there is an implicit guarantee of Tata Sons, and, in the Indian context, it is unimaginable for a Tata group company to renege on a payment obligation. 
 
However, a sticky issue is Tata Steel, where lenders have inserted covenants in the loan agreements allowing them to pull out the loans if it ceases to be a part of the Tata group. Ironically, from the shareholder perspective, Mr Mistry is most likely to cut the losses of over 1 million-1.5 million pounds a day on account of Corus Steel of the UK and bring the company back in shape. Will bankers be against such a move?
 
Also, would Indian banks really refuse to lend to Tata Chemicals, Tata Motors, Indian Hotels or even the debt-laden Tata Steel and another two-dozen listed Tata companies at competitive rates on a stand-alone basis? And yet, we hear that banks are struggling to find bankable projects.
 
Messy Structure
If anything, the revelations of the past two weeks ought to worry Tata Sons about stricter scrutiny by the Securities and Exchange Board of India (SEBI), the tax authorities and their own investors. The current structure of Tata Sons allows one individual, heading the Tata trusts, to effectively ride roughshod over independent directors and dictate the fate of dozens of listed entities and their millions of shareholders. This goes against all norms of good governance and most proxy advisory firms have been scathing in their criticism. The 14 Tata trusts, acting under orders of a single person, can do this by way of their collective 67% shareholding in Tata Sons. 
 
At a time when the government has cancelled the registrations of several NGOs, it is worth noting that the Tata trusts also enjoy tax exemptions from the government. The battle with Cyrus Mistry has exposed the role of ex-Tata executives (NA Soonawala and RK Krishna Kumar) in scrutinising the investments of Tata Sons, calling into question the whole edifice of philanthropic activity, not to mention the insider trading angle and sharing of price sensitive information that SEBI is reportedly investigating. One may well ask, in the context of Nitin Nohria’s role in Mr Mistry’s ouster, whether the massive $50-million donation to Harvard Business School had a quid pro quo attached? Why is such a contribution from tax-exempted trust funds, leading to a loss of revenue for India?
 
The saving grace in this sorry episode is that a few of the trustees on the Tata Trusts who are also independent directors of group companies, set a great example of good governance. However, SEBI must ensure there is no scope for a repeat of this situation by telling Tata Sons that trustees of its 14 trusts cannot be ‘independent’ directors on listed group entities. Proxy advisory firms have also pointed out that as many as 10 independent directors have been on boards well past the tenure prescribed by governance regulations.
 
Benefits of ‘Philanthropy’ 
A February 2015 article by Zaheer Masani (son of the famous Swatantra Party leader Minoo Masani) points out how Tata UK, was “keen to advertise its commitment to corporate social responsibility, with the magic letters ‘CSR’ sprayed across all its publicity.” It was ‘the dominant theme’ at Tatas’ ‘inaugural reception’ in London. 
 
He writes, “Today Tata prefers to forget the buccaneering capitalism with which its founder began his remarkable career. Like most other Indian merchant princes of his time, he cut his business teeth in the notorious opium trade with China.” 
 
Given the aggressive muscle flexing by the Tata trusts in the Cyrus Mistry episode, one could well question whether this much-touted philanthropy has turned into a very smart business promotion and brand management tool. Such questions would have been considered sacrilegious in the past, but they are going to be raised openly and bluntly, now that the halo around that Tata name has been severely dented by Ratan Tata’s own actions.

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COMMENTS

Mahesh S Bhatt

8 months ago

Well go to Tata Memorial Cancer Hospital & see for yourself how many Cancer patients come all over India & are subsidised daily.Also Lady Ratan Tata Cancer Hospital. Donot forget Dorabji Trust does excellent work in Education/Sports /Sanitation & host of public causes.Its visionary perceptional Values based attitudes which is cracking the Tata's Gennext take off.Little turbulence trust they shall be back with bang. Mahesh Bhatt

Ramesh Bajaj

8 months ago

Unbelievable and SHOCKING, what is happening in public limited companies.
What an exposé, Sucheta Dalal?
Requires a lot of courage. Kudos!

Naanu Naanu

8 months ago

Do I smell another defamation suite against Sucheta Dalal?
Kudos for being the same person, you were when you wrote about DSQ in '90s.

Some light on Tata's investment with a temple town in Ananthpur District (along with now into the Tata Board's new SIAM mogul) would be interesting.

Shankar Pachari

8 months ago

Great article, with bold points that others would refrain from reporting. The retail investor will be affected indirectly by this, because almost all mutual funds and ULIPs hold a large chunk of Tata group shares. These fund managers should ensure that good governance is maintained, or vote accordingly.

Francis Xavier

8 months ago

excellent article.

Arthur James

8 months ago

More skeletons out of the cupboard . The story gets murkier and murkier . Thank you Ms Dalal for keeping us well informed with your analytical research and documentation as always , week after week and day after day .
Way to go ! Thank you .

Arthur James

8 months ago

More skeletons out of the cupboard . The story gets murkier and murkier . Thank you Ms Dalal for keeping us well informed with your analytical research and documentation as always , week after week and day after day .
Way to go ! Thank you .

Kumar Swamy

8 months ago

For $100B group, what's wrong in paying media company $6 million? You in the media and associated non-Tatas are on the wrong side? You have left out how Radia came into Tatas (to take care of difficulties in getting telecom licenses, remmebr 2G/3G scam?....) and you have left out super foreign acquisitions of Tetley, Eight o' Clock, Jaguar/LandRover deals which are raking in BILLIONS of dollars every year in profits. Why such one-side article in joining the gang to tarnish the image of Tata? Shame.

Karthik N

8 months ago

Congratulations Ms. Dalal on another beautiful piece. Hope to see a much more insightful and well researched article on the lines of NSE and NSEL

Ananthanarayanan P

8 months ago

It is sad to see the beating the Tata image has taken under Ratan Tata. Since the removal of Cyrus Mistry a lot skeletons have tumbled out of Tata cup boards. Rather than answering point by point of Mistry's serious and grave charges, Tata has taken PR exercise to protect his name. Who is going to bear the cost of these PR spendings ? Ratan Tata ? No, it will be share holders. I remember in the 70s rather than succumbing to Govt / Political pressure , Tatas had refused to sell their products. There s a case point in the 70s when Tatas wanted to set up a automobile plant in Tamilnadu, a minister in Karunanidhi's cabinet asked for a cut . Tata's refused . Thus tamil nadu lost an opportunity . To this Karunanidhi Ratan Tata has written a personal letter which can een in the link below: http://www.news18.com/news/india/dmk-tata-raja-360461.html.
Whom is Tata appreciating ? Raja of 2G fame who is now on bail after being imprisoned .
It is shocking that Tatas have stooped to such low level . One need not be surprised if more such news on misdimeanors tumble out of Tata stable for wrong reasons.

Ashok Visvanathan

8 months ago

What happens is going to depend on the way the Indian Govt institutions vote. If History is a guide, they will support Tata Sons.

ramchandran vishwanathan

8 months ago

excellent article. Its really worrying as a shareholder to see the so called ethics & governance being reduced to being only words in paper.

Magnitude 7.3 quake jolts Japan, tsunami warning issued
An earthquake with a preliminary magnitude of 7.4 struck northeastern Japan's Fukushima on Tuesday, a weather agency said, while tsunami waves were observed in the area and two persons were injured.
 
The quake registered lower five on the Japanese seismic scale of seven in northeastern Fukushima prefecture, Xinhua quoted the Japan Meteorological Agency as saying.
 
Tsunami evacuation orders were issued in areas including Fukushima, Miyagi, Iwate, Aomori by the weather agency, as the first wave of tsunami was observed at coastline 20 km east of Iwaki city in Fukushima prefecture and then 1.4-metre tsunami were observed in Sendai in northeastern Miyagi prefecture after the quake.
 
The weather agency also warned of further tidal waves of up to three metres for Fukushima and one metres for other parts of the coastline facing the Pacific.
 
Tidal waves of 0.3-1.4 metres have been observed so far at Onahama port and Soma port in Fukushima prefecture, Ofunato port and Kuji port in northeastern Iwate prefecture, Sendai port and Ishinomaki Ayukawa in northeastern Miyagi prefecture, Oarai port in eastern Ibaraki prefecture and Katsuura in eastern Chiba prefecture.
 
Two old men were injured in Fukushima, with one struck by falling tableware at home and the other cut by broken glass at a nursing home.
 
The epicentre of the quake was at a latitude of 37.3 degrees north and a longitude of 141.6 degrees east and occurred at depth of 10km, said the weather agency.
 
The temblor was centred in waters offshore of northeastern Fukushima prefecture which borders the Pacific Ocean and is to the northeast of the nation's capital city of Tokyo.
 
The jolt, centred in the Fukushima, could be felt in central Tokyo and also shook other northeastern Japanese prefectures including Tochigi and Ibaraki.
 
In addition, Shinkansen train services were partially suspended in eastern Japan and power outage affected at least 1,100 households in Fukushima prefecture and central Niigata prefecture.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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RBI's stiff conditions for Rs2.5 lakh withdrawal for weddings
Following the cash crunch resulting from the recent demonetisation, the RBI on Monday imposed stiff conditions for withdrawal of up to Rs 2.5 lakh in cash from bank accounts for weddings, saying the money can be withdrawn only from the credit balance as on the day demonetisation was announced on November 8.
 
"A maximum of Rs2,50,000 is allowed to be withdrawn from bank deposit accounts till December 30, 2016, out of the balances at credit in the account as of close of business on November 8, 2016," the Reserve Bank of India notification said.
 
"Withdrawals can be made by either of the parents or the person getting married (Only one of them will be permitted to withdraw), " it said.
 
The application for withdrawal should be accompanied by evidence of the wedding, including the invitation card and copies of receipts for advance payments already made.
 
Moreover, there should be "a detailed list of persons to whom the cash withdrawn is proposed to be paid, together with a declaration from such persons that they do not have a bank account. The list should indicate the purpose for which the proposed payments are being made," the notification added.
 
The application for withdrawal should provide names of the bride and groom, their identify proofs, addresses and date of marriage.
 
The RBI also said banks should encourage families to make wedding expenses through non-cash means like cheques or drafts, credit or debit cards, pre-paid cards, mobile transfers, and internet banking channels.
 
"Therefore, members of the public should be advised, while granting cash withdrawals, to use cash to meet expenses which have to be met only through cash mode," RBI advised the banks.
 
Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

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COMMENTS

Gopalakrishnan T V

8 months ago

Very stringent Conditions to comply with. This is how the implementation of the demonetisation scheme fails. Weddings are occasions where people have to spend lots of money for various purposes and in many places c ards are not ccepted. Caterers, halls, decorations, shopping of items meant for gifts and other purposes like dress, jwellery, etc and lots of travel expenses have to be paid by cash and RBI cannot bring in such conditions for withdrawal of own cash. Even the balance as on the 8th November to be reckoned for drawal purposes is senseless as the element of black money cannot be there in most of the cases. The approach of RBI seems to be senseless and it definitely calls for a review and upward revision liberally.

REPLY

Vikram Jere

In Reply to Gopalakrishnan T V 8 months ago

Caterers, halls, decorators, many gift shops, travel agencies hold accounts in banks, why can't a cheque or online money transfer modes to be used. People create such situations when everything can be dealt cashless. Change is required and every caterer, hall owner etc should pay tax wisely.

Gupta

In Reply to Gopalakrishnan T V 8 months ago

Agree with you. The only limited place where this scheme has gone a little wrong is in restricting people their right to withdraw their own money. It is not the government's business to question where the money is being spent. They can question deposits, not withdrawals. Depositors have a right to their own money. Hope the Govt can fix this flaw soon.

Vikram Jere

In Reply to Gupta 8 months ago

I hope u know that there are many people who withdraw money and feed black money holders to convert their old 500/1000 rs notes with the new ones. I believe for time being this is the right step by RBI.

Anbalagan Veerappan

8 months ago

Better they would have right away said that they will not give cash!

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