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Hindu Business Line: Looking to restore calm, Tata signals it's business

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Hindu Business Line, J.D. Power, JD Power, 2016 India CSI, Tata, Cyrus Mistry

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On a day of relative calm at the Tata Group after several bruising days of bitter back and forth following the dismissal of Tata Sons Chairman Cyrus Mistry, the 150-year-old business empire seemed eager on Friday to signal to investors and employees that it is back to business as usual

Announcements from two Tata Group companies seemed intended to change the narrative away from the recent boardroom battles. Indicatively, Tata Steel went public with its agreements with Quebec government entities in Canada to conclude investments of nearly Rs. 875 crore. Additionally, Tata Motors announced it had secured third position in the JD Power 2016 India Customer Service Index Study.

The steel and auto businesses have, in particular, come in for unflattering attention after Mistry, in a letter to the Tata Sons Board, pointed to “flawed” decisions that, he claimed, could lead to Rs. 1.18 lakh crore write-downs within the Group.

Company insiders say more “positive” announcements will be made next week.

‘No cascading effect’

“During the meeting between Ratan Tata and the group CEOs, it was agreed that the best way forward is to not let individual companies get affected by the controversy. Tata also conveyed that boardroom issues at Tata Sons should not cascade down to the business,” said the source.

Tata Steel, whose European business was flagged by Mistry as one of the trouble spots, said on Friday that one of its Canadian units has decided to invest C$125 million as equity and C$50 million as debt with the Government of Quebec’s investment entities, Resources Quebec and Investment Quebec (IQ) respectively.

This is to set up mining operations across Quebec-Newfoundland and Labrador-peninsula and multiple processing facilities, including a beneficiation plant.

On Tuesday, a day after taking over as the Interim Chairman of Tata Sons, Ratan Tata had met CEOs of Group companies and told them to work towards taking the companies to leadership positions in their respective businesses.

“The companies must focus on their market position vis-à-vis the competition, and not compare themselves to their own past,” he said, addressing managing directors and senior leaders of Tata companies, according to a press release from Tata Sons.

Since the controversy became public on Monday, uncertainty over the future leadership has unnerved investors and employees. Tata Group companies lost a combined Rs. 27,506.34 crore in market value over three days. On Friday, Tata stocks bounced back to close the day with up to 6 per cent gains. Shares of Tata Motors rose 2.68 per cent and Tata Steel 1.85 per cent on the BSE.

‘Not revered any more’

However, questions remain on the the manner in which Mistry was eased out. Analysts say Mistry’s allegations merit a response.

Proxy advisor Institutional Investor Advisory Services (IiAS) said in a note, “The Tata group must recognise its engagement rules have now changed. The... developments (have) left stakeholders bewildered. The board has failed to recognise (its) need to communicate. This absence of clear communication has prompted excessive speculation.”

It added that the group must now expect far greater scrutiny about its finances and workingsand “should no longer expect to be revered”.