Tata-Mistry battle makes SBI red

The tussle between Ratan Tata and Cyrus Mistry has got the country’s largest bank worried. State Bank of India (SBI) has advised Tata Sons, now led by Tata, and Mistry camps, to resolve the conflict in an amicable way to avoid any adverse impact on the working of operating companies in the group.

Senior SBI officials, aware of the developments, said both parties have apprised the bank on their positions after Mistry’s removal as chairman of Tata Sons, and Tata taking over as interim chairman on October 24. 

The bank’s management has heard both sides and there has not been any intervention from the lender’s side. 

However, as a step to protect its interest as a lender, SBI will look at the financial stability and corporate governance practices in companies where it has exposure, bank executives said.

“Things shouldn’t have happened in such a way. When so much is at stake, the implications on business and the system could be huge. The bank has substantial exposure to group entities in India and overseas,” said an SBI executive, who did not want to be identified. He, however, did not elaborate on the amount of loans to the group. 

The total consolidated debt of 27 listed companies of the Tata Group, including Tata Steel and Tata Motors, stood at about Rs 2.41 lakh crore at the end of March 2016, according to data from Capitaline. Besides, the loss-making Tata Teleservices, which is unlisted, had debt of  Rs 30,000 crore at the end of March 2016. 

Besides both camps speaking to bankers, Tata had also met the Life Insurance Corporation of India top brass to discuss issues. 

SBI group executives said the bank management’s message to both sides has been such that disputes are best sorted out internally in a constructive manner. If the situation drags, it could impact the operations and profitability of operating companies, SBI top brass conveyed to both parties. 

SBI has provided strong support to the Tata Group - under Ratan Tata’s tenure as group chairman in the past decade - through various financial instruments and guarantees, including high-profile overseas acquisitions such as Jaguar Land Rover and Corus. 

Tata Consultancy Services (TCS) has been a key information technology (IT) services provider to SBI. The country’s largest lender selected TCS to customise the software, implement the new core banking system and provide ongoing operational support for its centralised IT. 

In late October after the Tata-Mistry fight came out in the open, bankers had said Tata Group companies were run on sound operating practice, and Mistry’s claims on potential write-downs worth $18 billion were highly exaggerated. 

Their defence for the group came after Mistry had charged that losses on acquisitions by Tata Steel in Europe, and investments in Indian Hotels and Tata Teleservices could lead to additional write-downs. 

Aditya Puri, managing director and chief executive of HDFC Bank, had said at the Business Standard Banking Round Table on October 27: “HDFC Bank is banker to many Tata Group companies and claims about write-downs are not correct.”

According to bankers, the group has always honoured its commitment to banks. Also, Tata Group companies are professionally managed and lenders are comfortable dealing with them, they added.

Tata Groups debt trap
 

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