Tata Motors lost orders from Ola and Uber due to Mistry-Tata tiff

According to the NCLT Mumbai bench order dated July 9th, Ratan Tata asked Mistry to consider a proposal by Ola which wanted to buy 150,000 cars

Tata Motors lost a sizeable order from cab aggregator firms Ola and Uber as the group’s former Chairman, Cyrus Mistry, and group patriarch Ratan Tata fought a bitter battle. It was India’s largest carmaker Maruti, which finally bagged the order.

According to the National Company Law Tribunal’s (NCLT’s) Mumbai Bench observation dated July 9, Tata asked Mistry to consider a proposal by Ola, which wanted to buy 150,000 cars. The order could have revived the fortunes of Tata Motors, which was facing headwinds as the Nano failed to make a mark in the market.

In a letter to Mistry dated September 16, 2015, Tata said a proposal to offtake 150,000 Indicas and Nanos should be welcomed, as it constitutes about 15 months’ production at current sales levels. “If Tata Motors could execute both the Ola and Uber proposals it would be even better and would be a real shot-in-the-arm for the company. How will Tata Motors justify turning away any proposal for a guaranteed offtake? And how would such a decision be viewed in the public domain? The company has allowed such a potential business opportunity to go to Maruti, while Tata Motors is gasping for breath, I am raising this with you as these would be issues with which you would be involved operationally as you are in fact the de-facto CEO or executive chairman of the company,” Tata said. “

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 everyday,” Tata wrote to Mistry.

Tata also wrote to Mayank (Pareek), president of Tata Motors, saying that selling 150,000 vehicles would constitute around 10 months’ business. If this went to Maruti Suzuki, then how would the company management explain why they turned away from such business in the offing, he asked. He has doubted that there was some disconnect somewhere in getting through. Therefore, he put it to Mayank and he brought it to the notice of Mistry.

One Shailesh Chandra at the instruction of Mistry put it to Mayank, saying they were in touch with Ola till June 2015 for a potential deal regarding purchasing 8,000 Nanos and 6,000 Indicas in three months. Ola put a condition that the vehicles should be financed by Tata Motors Finance with a right of refusal and exclusivity for them.

Meanwhile, an offer came from Uber with a requirement of 120,000 Indicas and Indigos, with a proposal to keep security deposit with Tata Motors, agreeing to take the entire risk of default beyond 2 per cent. Since Tata Sons was on the verge of finalising an agreement with Uber, he asked Mayank to understand their inability to respond to Ola.

When nothing happened as said by Chandra at the behest of Mistry, Tata wrote the letter suggesting Cyrus to act fast to grab the opportunities either with Ola or with Uber, given Tata Motors’ current inability to register sales. There were objections from Mistry that Tata had personal investments in Ola. Tata said they should not lose this opportunity but ultimately neither Uber nor Ola business came to Tata Motors, resulting in a huge loss to the company, the court order said. Madhu Kannan, one of Mistry’s confidant, later joined Uber after his removal from Tata Sons.