Tata Motors lost huge Ola, Uber order to Maruti, courtesy Cyrus Mistry: report
14 Jul 2018
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After former Aircel promoter C Sivasankaran’s allegation that Tat Son’s ousted chairman Cyrus Mistry had caused a loss of Rs26,000 crore to the group by scuttling the planned sale of Tata Teleservices (TTSL) to Vodafone India, it now appears that the reign of Mistry and his bitter feud with patriarch Ratan Tata has proved costly for the Group.
It has now come to light that cab aggregators Ola and Uber have pulled out a huge order of over 2.7 lakh vehicles from Tata Motors during the long tiff between Ratan Tata, the chairman emeritus of Tata Group and former chairman Cyrus Mistry.
Rival Maruti Suzuli grabbed the order as Tata Motors went slow on it or rather neglected it, says a report in Business Standard.
These ride-hailing companies procure cars from automakers to make it available for drivers on installments.
Ratan Tata reportedly asked Mistry to consider a proposal by Ola, which wanted to buy 150,000 cars. He also asked Mistry through a letter if Tata Motors could execute both the Ola and Uber proposals.
According to Tata, the deal would have constituted about 15 months of the company’s production at current sales levels. It would also help the auto major to come out of the loss due to the company’s failed Nano car.
The report further added that Tata was in talks with Ola co-founder Bhavish Aggarwal who was keen to acquire 10,000 Nanos and Indicas / Indigos from Tata Motors on outright purchase, lease or joint venture. On annual basis, they had plans to acquire 150,000 such vehicles.
Due to the lack of positive response from Tata group, Ola pulled out from the deal.
Ola’s rival Uber was also in talks with Tata Motors for a similar deal with a requirement of 120,000 Indicas and Indigos.
One of the major reasons for the failure of the deal is that Mistry had an objection to Tata's personal investment in Ola.
The National Company Law Tribunal’s (NCLT’s) Mumbai bench, which was dealing with Cyrus Mistry’s dispute with Tata Group, had also slammed Mistry saying that Ratan Tata was not in the wrong for suggesting business.
“How will Tata Motors justify turning away any proposal for a guaranteed offtake?”, asked Tata.
The 368-page court order interestingly included an instance where Tata Motors missed out on a major order nearly three years back.
According to the order, in a letter penned by Tata to Mistry, dated 16 September 2015, the former had discussed a bulk purchase proposal put forward by leading ride-hailing app Ola. "You would recall when we were together in Pune on September 1, I mentioned to you that Bhavish Aggarwal (co-founder of Ola cabs) told me that they were keen to acquire 10,000 Nanos and Indicas / Indigos from Tata Motors on outright purchase, lease or joint venture. On annual basis, they had plans to acquire 150,000 such vehicles. He mentioned while Ola was keen to do the transaction with Tata Motors, there was no positive response from Tata Motors. By contrast, Maruti Suzuki was chasing him every day," Tata wrote. He had added that he had expected Tata Motors to "vigorously" pursue the deal "given Tata Motors' current inability to register sales in the market and the lack of expected market acceptance of the newly introduced Bolt and Zest".
As per the court order, Tata had previously also written to Mayank Pareek, who is currently President (passenger vehicles business unit), Tata Motors, pointing out that selling 150,000 vehicles would constitute around 10 months' business. He had also asked Pareek how the company management would explain why they turned away from such business in the offing if Maruti Suzuki ended up with the order — as it ultimately did. "He has doubted that there was some disconnect somewhere in getting through, Therefore, he put it to Mr Mayank and Mr Mayank immediately brought it to the notice of Mr Cyrus," read the order.
According to the court order, on instructions of Mistry a person called Shailesh Chandra told Pareek that since Uber had approached the company with a far better offer they were unable to "respond fast to Ola".
But when nothing happened on the Uber front either, Tata dashed off his letter to Mistry. "A proposal to offtake 150,000 Indicas and Nanos should be welcomed by the company, as it constitutes about 15 months' production at current sales levels. If Tata Motors could execute both the Ola cabs and Uber proposals it would be even better and would be a real shot-in-the-arm for the company," said Tata, rueing that the company had lost out the business opportunity to Maruti Suzuki "while Tata Motors is gasping for breath".
Tata had concluded his letter saying that "while Tata Motors has turned away the Ola cabs proposal as being inferior, I hope for your sake and for that of Tata Motors that the Uber proposal for a similar number of vehicles, which Tata Motors is pursuing, does indeed get concluded". As it transpired, Tata Motors reportedly did not bag the Uber order either.
The court order further said that the letter's suggestion to Mistry has been held against Tata alleging that the latter, given his "personal investment in Ola" had tried to "interfere in the business decisions" so that Ola bagged the deal.
"I could not understand how such a suggestion by Mr. Tata to grab that opportunity amounts to Mr. Tata interfering with affairs of Tata Sons. Has it been said anywhere that Mr. Cyrus should not have any deal with Uber and only to have deal with Ola? Nothing of that kind is apparent in the letter written by Mr. Tata," the order said, adding, "Whether Mr. Tata ignored Mr. Cyrus and directly had a deal with Ola? It is not so. Ultimately, what happened is his anxiety has remained as suggestion only. Business has not come".
