Tata Motors Acknowledges Its Not So ‘Nano’ Problem
The Tata Nano factory is now used for other products like Tata Tiago.
The Nano may have turned out to be a huge drag on Tata Motors’ balance sheet, but not all the investment made in the world’s cheapest car project has gone to waste, said Subodh Bhargava, who was chairing the company’s extraordinary general meeting on Thursday.
The meeting which had been convened to seek shareholders’ approval to remove independent director Nusli Wadia from the board, saw Bhargava try to address some of the concerns raised by Wadia.
Bhargava said the company is already using the Tata Nano’s Sanand plant to also build its highest-selling car, the Tata Tiago.
He added that majority of the development cost and investment made to build the Nano had already been written off, as per accounting standards.
It should be noted that major part of the investments in the factory are capable of being utilised for other products, as is evident from the production of the company’s Tiago cars in the same factory now. As far as development cost and investments in Nano are concerned, they have significantly been written off, in-line with the accounting policies over the last several years.Subodh Bhargava, Independent Director, Tata Motors
Bhargava, while acknowledging that the Nano never really managed to take off, stated that project delays, increase in costs due to change of manufacturing location, and low volumes had led to the failure.
Nusli Wadia in his letter to shareholders which was read out at the meeting on Thursday, had called the investment in Tata Nano "ill-conceived". He said that the delay in closure of the project, even after its commercial failure, is adversely impacting the financials of the company.
The investment and losses on Nano have been in thousands of crores of rupees and its continuance for the wrong, non-financial reasons is against shareholders’ interest.Nusli Wadia’s December 21 Letter To Shareholders
He had criticised the Nano project in his earlier representation to Tata Motors shareholders.
Wadia also condemned the high level of cross holdings Tata Motors has in other group companies. This holding includes a Rs 8,600 crore investment in the parent, Tata Sons, which Wadia declared as “minimum return, zero liquidity and no exit”. This he said was Tata Sons’ way of ensuring that it had voting control in all these companies.
The listed companies as a whole have blocked approximately Rs 70,000 crore in holding Tata Sons shares equivalent to 14 percent of its capital with the sole purpose of shoring up the voting rights of the (Tata) Trust.Nusli Wadia’s December 21 Letter To Shareholders
Ishaat Hussain, who was representing the requisitionist, Tata Sons, tried to rebut this allegation, saying Tata Steel Ltd. had provided a helping hand to Tata Motors during its early days by holding up to 18 percent in the company.
It was only after 1992 that Tata Steel started paring down its stake in the company to the present level of 2.5 percent, he added.
I was with Mr. Tata on many road shows, in 1992 when with reform globalisation started, and wherever he went, Mr. Tata used to be told, ‘Mr. Tata we don’t like your cross holdings. Mr. Tata took no offence and then he systematically started bringing down our cross holding. This is the legacy that is left now. Many of these are what I would call as strategic investments, every company in the world makes strategic investments. And by the way, none of these investments are dud investments. They are all outstanding investments.Ishaat Hussain At Tata Motors EGM
Tata Motors became the second group company to convene an EGM, seeking to remove Nusli Wadia from the board of the company. On Thursday, shareholders of Tata Steel had voted in favour of the resolution for Wadia's removal.