The Tata soap opera: Act 2, scene 1 unfolds

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The Tata Sons tragedy is about the slugfest in public domain and the delicacy to disclose corporate information

We had seen the possibility of the Tata soap opera unfolding about a fortnight ago. The plot has since then thickened.

But this is a bigger tragedy than what appears. The tragedy is about the slugfest in public domain and the delicacy of making public, corporate information. The future alone will establish which way the wind is blowing.

What is not a secret is that TCS has been the main stay of Tata Sons for decades. Going back to the times of Faqir Chand Kohli, who nurtured the infant organisation to its adult shape, Subramaniam Ramadorai took forward the tradition brilliantly.

I recall his supporting a PhD work in Pittsburg on analysing the cultural aspects of project work in TCS. Chandra (the popular name of TS Chandran) was nurtured by both Kohli and Ramadorai. He proved to be a worthy inheritor. That is another story.

However, the impression needs to be resisted that under Cyrus Mistry, all the companies started sinking, save TCS. TCS, for long years, was a division of Tata Sons  essentially because Tata Sons wanted exclusive control of the profits of TCS.

Ratan Tata himself has had very clear views on who he would approve as the head of a Tata firm and many will recall how a whole series of heads to Tata companies were eased out when Ratan Tata took over as the Chairman of Tata Sons in the 1990’s.

This week is going to witness several audit committee meetings in the Tata group. The boards are also going to meet. What happened in the board meeting of Indian Hotels Private Limited is not a positive news. There are not many cases of independent directors directly interfacing with stock exchanges.

Even the regulators had not anticipated such a situation. Several directors of Indian Hotels Private Limited (Taj group of hotels) are powerful people.

As a test case, Taj Hotels serves as a good illustration. It has not been doing too well in the recent past and it is not quite clear how the current happenings will help its business.

The facts of the case are that, barring TCS, the share of dividends contributed to Tata Sons, by companies other  than TCS, had dropped nearly 10 per cent from March 2013 to March this year.

Simultaneously, the holding companies’ staff costs, it is reported, rose from about 870 million rupees to 1.8 billion rupees over the same period.

Predictably, in such a situation, many jump on the stage with their own version. Some Tata trusts are complaining that they were not informed about Tata Powers’s acquisition. Others are fishing in the waters of Air Asia and alleging the contravention of foreign direct investment rules.

The Indian regulatory environment is precisely the domain where a lot of things can be made controversial by plain use of a chronological framework or lack of specificity or even worse: Pricing and costing mechanism. Many contributory elements have caused the situation.

Many regulations were drafted by people who had influence with the then powers that were and had little exposures to prerequisite of the regulatory function.

Worse, the realisation that no regulatory system is perfect without sound practices, is slow to dawn. Practices take time to emerge. The Indian regulatory frame, since the coming in of liberalisation, is yet to mature. There are several grey areas.

It is not surprising, therefore, that foreign intuitional investors, in certain Tata firms, are getting worried. Say in the case of Tata Motors where foreign institutional investors have more than 10 per cent stake, it is a matter of concern to them that Tata Sons is privy to much strategic information

Under such circumstances, it is easy to go reductionist. Personalities are drawn in and blame-game becomes the domain of PR experts. In a war like this, there can only be losers.

As one looks around the thundering silence of several regulatory agencies on obvious violation of a regulatory ethos by contending parties, it is evidence of a system which has yet to mature.

What is happening may be inherent, but surely, the coping strategies from the knowledgeable corporate thinkers and regulatory agencies can be better. The Ministry of Corporate Affairs cannot afford to keep itself totally aloof.

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