Cyrus Mistry praised; Tata Nano a loss making project, admits Tatas

To begin with, just before the Board Meeting of  the Indian Hotels  Company Limited, a meeting of the Independent Directors was held in Mumbai “taking into account Board assessments and performance evaluations  carried out over the years, the Independent Directors unanimously expressed their full confidence in the Chairman, Mr.  Cyrus  Mistry  and praised the steps taken  by him in providing strategic direction  and leadership to the Company.”

In a note to the Bombay Stock Exchange and the National Stock Exchange, Beejal Desai, Vice  President - Legal & Company Secretary of Indian Hotels Company Ltd said, “After   deliberations,  the  Independent  Directors  came  to  a  view  that   being  a  listed Company, it  was imperative  for  the  Independent Directors to state  their  views to  the investors  and  public  at large, such  that  those  who  trade  in securities  of the  Company, make an informed  decision.”

The thumbs up from the Independent directors goes on to prove that Mistry was after all   a competent person and was doing his job well. This was contrary to what the Tata Sons Board thought of him and ousted him from his Chairmanship.

Meanwhile in a reply note sent to the stock exchange by HK Sethna, Company Secretary of Tata Motors, it was mentioned that the Tata Nano project received  Indian and global interest for its path breaking conceptualization  and objective of providing safe and comfortable transport solutions  at an affordable  price.   “Considering  the attention  and the excitement  it created, project investments were set up for capacities for around 2,50,000 cars per annum.  However, unfortunately, and due  to combination  of several  factors, including  project  delays  due to change in location of the factory, and the perception of being a 'low-priced' car, the volumes initially anticipated  did not materialize  and utilization of capacities are significantly  lower.  In a highly price-sensitive segment of the market, coupled with low volumes, it has been a loss making product.”

The note further said that, “It should be noted that a major part of the investments in the factory are capable of being utilized for other products, as is evident from the production of the Company's Tiago cars in the same factory.   As far as development cost and investments in Nano specific dies and toolings are concerned,  these have been significantly  written off, in line with the accounting policies over the last several years.”

“The  Company  recently  presented  and  received  the  approval  of the  Board  for  its  future passenger vehicle product and business strategy, which envisages refocusing its strategy on growing  and attractive  segments  of the passenger  vehicle market  in terms of volumes and profitability,  and aligning  with the changing  and enhanced  expectations  of the  consumers regarding contents and features.  The Company is committed to pursuing this refocused long term strategy and future product decisions arising from this will be announced in the course of implementation of this approved strategy.”

The reply from Tata Motors was in response to one of the  points noted by Mistry that "Beyond this, the Nano product development concept called for a car below Rs.1 lakh, but the costs were always above this. This product has consistently lost money, peaking at Rs.1,000 crore. As there is no line of sight to profitability for the Nano, any turnaround strategy for the company requires to shut it down. Emotional reasons alone have kept us away from this crucial decision."

With regard to another comment made by Mistry to the Tata Sons Board, he had stated  "Another challenge in shutting down Nano is that it would stop the supply of the Nano gliders to an entity that makes electric cars and in which Mr. Tata has a stake." To this Tata Motors noted, “We would like to clarify that the matter is in a preliminary exploratory stage and no arrangement for supply of gliders has been concluded.”