Two crown jewels of Tata Sons – Tata Consultancy Services (TCS) and Tata Steel – yesterday debunked claims made by Cryus Mistry’s office a day earlier.
On its part, TCS rebutted claims made by Mistry’s office that the company had a ‘near death experience’ at the hands of Ratan Tata.
In a rebuttal, TCS issued a statement on behalf of FC Kohli, former chief executive and deputy chairman of TCS.
“Cyrus Mistry’s comments regarding the sale of TCS to IBM at some ‘unspecified point in time’ are not correct,” Kohli was quoted in the statement.
“I was actively involved in the decision to bring IBM to India. A JV (joint venture) for hardware manufacturing and support in India, Tata IBM, was set up in 1991-92. This JV was undertaken to promote a computer hardware industry in India which was non-existent at that time.”
“I would like to reiterate that at no point at that time was there ever an intention of the Tata Group to sell TCS to IBM.”
The rebuttal came a day after Mistry’s office alleged that TCS had a ‘near death experience’ at the hands of Ratan Tata.
“When one talks about vision and near death experiences, it is worth recounting a little known fact. Midway during the TCS journey to date, FC Kohli was suffering from a cardiac condition. Ratan Tata was then heading Tata Industries’ joint venture with IBM and approached JRD Tata with a proposal from IBM to buyout TCS,” Mistry’s office had alleged in a statement on Tuesday.
“JRD Tata refused to discuss the deal because FC Kohli was still recovering in the hospital from his setback. On his return, Kohli assured JRD that TCS had a bright future and the group should not sell the company.
“JRD Tata turned down the offer, demonstrating true vision. But, it was also a near-death experience for TCS at the hands of Ratan Tata,” the statement from Mistry’s office claimed.
Tata Steel, too, debunked allegations made by Mistry’s office that ego issues had caused the Tata Group to suffer a huge unnecessary premia on the purchase of Corus Steel.
“The company strongly dismisses the unsubstantiated allegations being made against the company, its erstwhile board and management,” Tata Steel said in a separate statement. “The acquisition of Corus Group was based on the long-term strategy of the company to pursue growth through international expansion and enhance the portfolio of value-added products.”
“The performance of Corus post-acquisition validated the strategy till the black swan event of the global financial crisis structurally impacted the underlying demand conditions in Europe causing financial hardship to the entire industry.”
Tata Steel elaborated that the entire acquisition was undertaken by following due ‘board governance process’ under the supervision and oversight of the board of the company.
“The acquisition proposal was extensively deliberated in the board and the board approved the transaction,” Tata Steel said in the statement.
“As a responsible listed company, Tata Steel also made appropriate disclosures at various stages of the transaction to the regulators during years 2006 and 2007. These disclosures are available on the websites of the stock exchanges”.
On Tuesday, Mistry’s office observed that ego issues had caused the Tata Group to suffer a huge unnecessary premia on the purchase of Corus Steel.
“It is common knowledge that the decision to acquire Corus for over $12bn, when only a year earlier it was available at less than half that price, was based on one man’s ego and against the reservations of some board members and senior executives,” the statement from Mistry’s office had said.
“The overpayment made it harder to invest in the acquired assets which had been neglected, and thereby, placed many jobs at risk.”
Another rebuttal to the allegations made by Mistry’s office came from B Muthuraman, former vice chairman and managing director of Tata Steel.
“I am surprised and very sad to see the speculative and biased views being fed in the media regarding the acquisition of Corus nearly a decade back in early 2007,” Muthuraman’s office said in a statement.
“The long-term strategy of Tata Steel was well thought out after a lot of deliberation to grow the company through capacity expansion in India and internationally through inorganic growth.” “The overseas growth strategy was also to focus on accessing new markets through acquisitions, enhance the technology capability of the company and develop high end premium products.”
According to Muthuraman, following the successful acquisition of NatSteel in Singapore and Millennium Steel in Thailand, Corus Group provided a natural fit for the company’s portfolio especially since the Netherlands facilities which is the gold standard in competitive positioning were part of the asset perimeter.
“The Board of Tata Steel was deeply involved in all the deliberations and had approved the transaction. The value of Corus increased since the initial bid in line with the commodity price boom, its underlying performance and the transaction process,” Muthuraman’s office said.
“The acquisition was through a transparent auction process managed by the Takeover regulator in the UK and the acquisition price was £50mn higher than the next bidder. In the first two years of the acquisition itself, Corus had an average annual EBIDTA of over £1bn pounds which justified the reasonableness of the acquisition.”
“The sudden and unprecedented scale of the global financial crisis in 2008 had a very significant adverse impact on the industry fundamentals in Europe which also impacted the performance of Corus. Therefore, such frivolous and unconsidered comments on the acquisition should be avoided.”
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