Mistry does U-turn on Corus, TCS as Tata veterans trash claims

Springing to the defence of Ratan Tata, two retired group veterans - FC Kohli and B Muthuraman - today rubbished as "frivolous and incorrect" Cyrus Mistry's charges that the patriarch wanted to sell TCS and his ego had inflated Corus acquisition cost, leading to the ousted group chairman partially retracting his remarks.

Mistry said he never stated that Tatas were wanting to sell TCS to IBM or any other company.

Within hours of the two coming out with strongly worded comments, Mistry said his statement of yesterday was based on "information from sources who were close to JRD Tata who informed him that it was Ratan Tata's intention, and not the group's intention, to sell TCS".

While Kohli, the first chief executive of Tata Consultancy Services, said at no point did the Tata Group consider selling the crown jewel to IBM, Muthuraman said the USD 12 billion Corus acquisition was a well thought out decision and the price paid was only 50 million pounds higher than the next bidder.

In a late evening statement issued by his office, Mistry said he did not "say that the ultimate decision was not unanimous, but there were differences and reservations significantly, the fact that Corus was available for purchase at half the price in the recent past is undisputed".

A day after Mistry had claimed that Ratan Tata's "ego" led to "overpayment" for Corus, which was available for half the price a year before the deal, Tata Steel too came out with a strongly worded statement saying the acquisition was extensively deliberated and approved by the company board.

Debunking Mistry's claims that Ratan Tata had pitched for sale of TCS to IBM when he was heading the joint venture between the two firms, Kohli said the ousted chairman does not offer any timelines.

He said he had suffered a heart attack, claimed by Mistry, in 1984, whereas the Tata IBM joint venture was set up much later in 1991-92.

"Mistry's comments regarding the sale of TCS to IBM at some 'unspecified point in time' are not correct," said Kohli, widely considered as father of Indian IT industry. "At no point at that time was there ever an intention of the Tata Group to sell TCS to IBM," he said in a statement.

Muthuraman, who was the head of Tata Steel when the acquisition was made in early 2007, rubbished the Mistry's remarks of overpayment as "frivolous and unconsidered comments", saying he was surprised and very sad at "the speculative and biased views".

In a statement, he said: "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." 

Under Mistry, sacked abruptly as chairman of the holding company of India's largest conglomerate Tata Sons, the group put up Europe's second largest steel maker Corus for sale due to its "deteriorating financial performance".

The sacking and bringing back of his predecessor Ratan Tata in the interim has triggered an ugly war of words with both sides washing dirty linen in public.

Tata Steel in a strongly worded statement said the allegations on Corus are "unsubstantiated and are being made against the company, its erstwhile board and the management."

"The acquisition of Corus Group was based on the long term strategy of the Tata Steel 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 said in a statement.

Mistry had said the Corus deal was not out of business sense but driven by "the ego of Ratan Tata".

The statement further said the acquisition was undertaken following due board governance process under the supervision and oversight of the board and that the company had also made appropriate disclosures at various stages of the transaction to the regulators during years 2006 and 2007.

Muthuraman, also articulated the strategy of inorganic growth and factors like a bidding war and spurt in commodity prices which led to a jump in valuations in the USD 12 billion, the biggest overseas buy by a domestic corporate till date.

"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," he said.
Muthuraman also said the Corus deal was through a transparent auction process managed by the British takeover regulator and the acquisition price was 50 million pounds higher than the next bidder.

He said Corus had an average annual pretax profit of over 1 billion pounds which "justified the reasonableness of the acquisition".

The overseas growth strategy of the company was to focus on accessing new markets through acquisitions, enhance the technology capability of the company and develop high end premium products, Muthuraman said.

Mistry had made the allegations in what was purported to be a rebuttal on charge of not contributing materially for the growth of TCS and JLR. This was the third in a series of statements by the ousted chairman of Tata Sons on October 24.

Mistry has made frontal allegations against Tatas, and particularly the way Ratan Tata conducted business, in each of the these statements.