How Tata Motors lost out on Uber, Ola deals involving 10,000 Nanos, Indicas
The reign of Cyrus Mistry, the ousted Tata Sons chairman, and his bitter feud with patriarch Ratan Tata has proved to be costly for the Group. Earlier this week, former Aircel promoter C Sivasankaran had alleged that Mistry had caused a loss of Rs 26,000 crore to the Group by scuttling the planned sale of Tata Teleservices (TTSL) to Vodafone India. Now it is appears that Mistry may also be responsible for making Tata Motors lose out on about 10 months’ worth of business. On July 9, the National Company Law Tribunal’s (NCLT’s) Mumbai Bench had dismissed all the petitions filed by Mistry and his family-run firms after a four-month long hearing. The 368-page court order interestingly included an instance where Tata Motors missed out on a major order nearly three years back.
According to the order, in a letter penned by Tata to Mistry, dated September 16, 2015, the former had discussed a bulk purchase proposal put forward by leading ride-hailing app Ola. “You would recall when we were together in Pune on September 1, I mentioned to you that Bhavish Aggarwal (co-founder of Ola cabs) told me that they were keen to acquire 10,000 Nanos and Indicas /Indigos from Tata Motors on outright purchase, lease or joint venture. On annual basis, they had plans to acquire 150,000 such vehicles. He mentioned while Ola was keen to do the transaction with Tata Motors, there was no positive response from Tata Motors. By contrast, Maruti Suzuki was chasing him every day,” Tata wrote. He had added that he had expected Tata Motors to “vigorously” pursue the deal “given Tata Motors’ current inability to register sales in the market and the lack of expected market acceptance of the newly introduced Bolt and Zest”.
As per the court order, Tata had previously also written to Mayank Pareek, who is currently President (Passenger Vehicles Business Unit), Tata Motors, pointing out that selling 150,000 vehicles would constitute around 10 months’ business. He had also asked Pareek how the company management would explain why they turned away from such business in the offing if Maruti Suzuki ended up with the order – as it ultimately did. “He has doubted that there was some disconnect somewhere in getting through, Therefore, he put it to Mr. Mayank and Mr. Mayank immediately brought it to the notice of Mr. Cyrus,” read the order.
The plot thickens at this point. According to the court order, on instructions of Mistry a person called Shailesh Chandra told Pareek that since Uber had approached the company with a far better offer they were unable to “respond fast to Ola”.
But when nothing happened on the Uber front either, Tata dashed off his letter to Mistry. “A proposal to offtake 150,000 Indicas and Nanos should be welcomed by the company, as it constitutes about 15 months’ production at current sales levels. If Tata Motors could execute both the Ola cabs and Uber proposals it would be even better and would be a real shot-in-the-arm for the company,” said Tata, rueing that the company had lost out the business opportunity to Maruti Suzuki “while Tata Motors is gasping for breath”.
Tata had concluded his letter saying that “while Tata Motors has turned away the Ola cabs proposal as being inferior, I hope for your sake and for that of Tata Motors that the Uber proposal for a similar number of vehicles, which Tata Motors is pursuing, does indeed get concluded”. As it transpired, Tata Motors reportedly did not bag the Uber order either.
The court order further said that the letter’s suggestion to Mistry has been held against Tata alleging that the latter, given his “personal investment in Ola” had tried to “interfere in the business decisions” so that Ola bagged the deal. “I could not understand how such a suggestion by Mr. Tata to grab that opportunity amounts to Mr. Tata interfering with affairs of Tata Sons. Has it been said anywhere that Mr. Cyrus should not have any deal with Uber and only to have deal with Ola? Nothing of that kind is apparent in the letter written by Mr. Tata,” the order said, adding, “Whether Mr. Tata ignored Mr. Cyrus and directly had a deal with Ola? It is not so. Ultimately, what happened is his anxiety has remained as suggestion only. Business has not come to [Tata Motors]”.