Saturday, September 15, 2018

AirAsia runs into heavy weather

On December 6, 2012, weeks before Ratan Tata was to retire as chairman of Tata Sons and incumbent Cyrus Mistry was to take over, Tata called for an urgent board meeting of the company at Bombay House, the 95-year-old colonial structure that's the group's headquarters. At the meeting attended by veteran Tata loyalists such as R. Gopala­krishnan, Ishaat Hussain, R.K. Krishna Kumar, Farrokh Kavarana and Arun Gandhi, Tata introduced a business proposal from AirAsia Berhad, a low-cost airline based in Kuala Lumpur, Malaysia. AirAsia was starting a new airline in India, and wanted the Tata's to invest up to 30 per cent, or $9 million (around Rs 63 crore), in the entity. Minutes later, Tony Fernandes, AirAsia chairman, walked in to make a presentation highlighting the viability of the business. By the end of the meeting, a decision to invest in the airline was taken with the following caveats: Tata Sons' investment in the new firm would be capped at $9 million, there would be no recourse to guarantees by the Tata Group (so that they cannot be held liable for money borrowed from banks for the business) and, finally, there would be appropriate representation of Tata Sons on the board of the new company.
That meeting would have been deemed normal, one of the many that Tata Sons, the holding company of the $100 billion salt-to-software conglomerate, holds every year, but for the strange turn of events since October 2016, when Mistry was ousted as chairman. In his case before the National Company Law Tribunal (NCLT), Mistry alleged that the December 6, 2012, meeting called by Tata made the situation a fait accompli, where things were decided beforehand, leaving those present with no option but to accept it. While questioning the Tatas' decision to enter the airline business at a time when the industry was going through a turbulent phase, Mistry also raised concerns over the interference of R. Venkataramanan or Venkat, the managing trustee of the Sir Dorabji Tata Trust in key matters concerning AirAsia India (incorporated in June 2014), although he was not a Tata Sons board member. Mistry also alleged that no due diligence was done before finalising the AirAsia deal, and flagged discrepancies in the management of AirAsia India.
15/09/18 MG Arun/India Today