MUMBAI: After replacing Cyrus Mistry as chairman of Tata Consultancy Services, the holding arm of the $103-billion empire issued a nine-page statement on Thursday, listing his alleged failures and hardly any contribution towards revenue growth and dividends.
For the first time, Tata Sons also said there were some issues of conflict of interest with the Shapoorji Pallonji Group, which holds around 18.4 per cent stake in the holding arm, which Mistry failed to address.
"Cyrus P. Mistry has been the Executive Vice Chairman (for one year) and Executive Chairman for nearly four years now -- a period long enough to show results in Tata Sons itself, which was his primary executive responsibility," said the statement.
"After four years, it is unfortunate that hardly any of his (Mistry's) major views on the management structure (which had impressed the committee favourably) have been implemented," the statement said.
"While dividend income was declining, expenses (other than interest on debt) on staff increased from Rs 84 crore to Rs 180 crore and other expenses increased from Rs 220 crore in 2012-13 to Rs 290 crore in 2015 (excluding exceptional expenses)," it said.
"Thus, but for the TCS dividend and even before impairment provisions, Tata Sons would have shown operating losses over the last three years (with a small surplus in between), showing the significant dependence on TCS," it said.
"This dependence was, indeed, a source of concern for the directors and its shareholders."
Tata Sons said the group's indebtedness also increased by Rs 69,877 crore to Rs 225,740 crore over the past four years, and despite the huge investments, the returns were not visible by way of increased profits.
As regards the conflict of interest, there was just a passing reference in the statement, without any elaboration.
"In addition, there were some significant issues of conflict of interest in relation to the Shapoorji Pallonji Group which he did not fully address," it said.
The statement also deplored the manner in which Mistry sought the support of independent directors of Indian Hotels to continue as chairman and said such an act betrayed the trust imposed in him.
"However, we will now do whatever is required to deal with this situation."
Earlier, Tata Sons said Ishaat Hussain will be the new Chairman of the board of directors of the Tata Consultancy Services in place of Mistry with immediate effect. It also issued a notice for a shareholders' meeting for Mistry's removal as a director.