Mumbai: The board of Tata Sons Ltd discussed a divestment plan for non-core businesses in its 15 September meeting, its last one before the 24 October meeting when Cyrus Mistry was forced out as chairman.
Some of the directors also expressed reservations about the five-year business plan for the Tata Group presented by Mistry at that meeting, according to minutes of the meeting that have been appended as an annexure in the petition filed by two investment companies of the Mistry family at the National Company Law Tribunal. The directors said the plan did not factor in macro-economic factors, the divestment strategy and risk factors in sectors such as telecom.
Ajay Piramal, an independent director on the Tata Sons board, even recommended the formation of a separate team to work on the divestment strategy. Amit Chandra and Nitin Nohria, two other directors and nominees of the Tata Trusts on the Tata Sons board, shared his view and suggested that a dialogue with private equity firms be initiated.
Mistry was removed as chairman of the holding company of the $103 billion group in the next board meeting. Calling his removal illegal, the investment companies have challenged the board’s decision. On Tuesday, they filed a petition at the tribunal. The discussion during the September board meeting on exiting businesses came in the backdrop of mounting debt. As on 31 March 2016, the Tata group’s consolidated debt stood at Rs1,66,453 crore, Mistry said in an interview in September.
On a query from Piramal on the basis for deciding the ‘exits,’ Mistry had explained that the companies which do not fall under the category of so called ‘major companies,’ or do not belong to a ‘cluster’ could be considered for divestment. Some of the clusters mentioned by Mistry during the discussion include financial services, defence, and consumer.
During the meeting, Chandra expressed several concerns on the five-year plan (2016-17 to 2020-21) presented by Mistry. He pointed out the need to have a “deeper dive into Tata Consultancy Services Ltd” as the success of the business plan was heavily dependent on the success of India’s largest software services company. The inadequacy of the plan has since been mentioned as one reason for the board’s unhappiness with Mistry.
Interestingly, Tata Sons has also claimed that Mistry did not make enough progress on divestment.
“There was little or no profit on sale of investments during these years i.e no significant divestment from Tata Son’s portfolio despite a planned list of divestment indicated from time to time.” it said in a public statement on 10 November.