Tata to Mistry - Part 2

As a Corporate Watcher for the last thirty years,I can honestly say that there is much truth in what Cyrus Mistry has said in his letter to Directors of Tata Sons after his sacking .In fact Tata may find it easier to dismiss Mistry,but find it very difficult to counter effectively the points raised in the letter. Ratan Tata's acquisitive habits and his lack of focus on returns on investment have destroyed billions of dollars in share holder value.Acquisition of U.K.Steel plant through enormous debt and continuation of Nano plant not only shows his lack of focus on returns,but his mindless expansion through borrowing.The philosophy of "Borrow and create assets" has landed many Indian groups in big trouble. ESSAR is an example.One thing can be said about Tatas though-- there is no siphoning of funds.

Ratan Tata's back-seat driving ,while in retirement,has thwarted Mistry's efforts to re-structure the group. Any new Chairman will face the same problems like Mistry. As Tata trusts hold 68 per cent in Tata sons, Ratan Tata will always be there and he will not give full freedom to any one. Most of the companies in the group are making either insignificant profits or losses. The two major exceptions are TCS and Tata Motors.