Negative returns in Tata Steel Europe a risk to group: Mistry

Up against Tata Sons' move to remove him as director of Tata Steel, ousted Chairman Cyrus Mistry today defended his leadership of the company, especially the handling of European operations, saying that the huge capital employed in it was earning negative returns and posed a risk to the entire group.

He also lashed out at "insinuations that Tata Steel board only looked at UK investments through a short term financial lens" saying it was "furthest from the truth".

In a representation to the Board of Directors of Tata Steel ahead of an EGM, which is to consider a special resolution moved by Tata Sons to remove him as director on December 21, Mistry said the sole premise of the step was his "removal from the Chairmanship of Tata Sons, which was illegal to begin with".

"There have been insinuations that the Board of Tata Steel only looked at the UK investments through a short term financial lens. This is furthest from the truth...," he wrote.

Mistry cited "continued investments in these assets, as well as the significant amount of management bandwidth devoted to optimise operations" in order to refute the allegations.

While asking the board to circulate his representation to its shareholders so that they can take "an informed decision", he drew attention to the European operations saying the total amount of capital employed there, which is "earning negative returns posed a risk to the overall group".

"Total capital employed in Tata Steel Europe grew from Rs 67,000 cr in FY12 to Rs 93,500 cr in FY15," he said.

Defending decisions to divest in the UK operations, Mistry said: "While pursuing a long term solution to the current issue, it is important to balance the needs of nearly one million shareholders of the company, who have supported the company for decades and many of whom rely on Tata Steel to supplement their income."

He added: "Our aim has always been to have a robust and resilient global operations. To ensure this outcome, we believe it is important to tackle some of the structural challenges with the UK assets, namely the potential high pension deficits, high energy costs and high taxes."

On November 25, in sharp escalation of boardroom tussle at India's largest conglomerate, Cyrus Mistry was ousted as Chairman of Tata Steel.

The 10-member board of Tata Steel by "majority consent" removed Mistry as Chairman and named O P Bhatt, an independent director and former SBI chief, as interim head.

Tata Steel was the third group firm to remove Mistry as chairman. First Tata Consultancy Services (TCS) removed him as chairman but that ouster was not through a vote but by virtue of Tata Sons holding a commanding 73.26 per cent stake in the India's largest software services firm.

Then on November 15, seven out of 10 board members of Tata Global Beverages voted him out.