Citibank was THE havala bank of India. The who’s who of India send money abroad to be parked in benami accounts. This made them very powerful. For a while they even controlled SBI, set up CIBIL (through HDFC) and were the original promoter of NPCI. They could walk into the office of the Finance minister or stroll down Janpath.
They convinced Ratan that they were all he needed to build a solid empire. Ratan was sincere, hard working, honest, talented …. And misguided. Ramadorai became head of TCS making him the first and only Tamilian CEO of a Tata group.
Tatas were not new to public markets. Way back in 1985, Tata Burroughs had had a successful IPO. Tata shares were held in esteem by investors. Tata Burroughs morphed into Tata Infotech. Which then merged into TCS. Citi promptly looted the TCS treasury of usd 500 million selling them some junk Citicorp BpO operation – a transaction described in detail in the book “If God were a Banker”. If the details are repeated here, the censor board of India may ban my posts for obscenity.
The basic point was that to make money – Citibank was continuously selling them something, restructuring something, merging something, demerging something ….. many in a fairly suspect manner. Venkatram was brought into Tata Trusts to manage all this. It was becoming clear that everyone was in violation of pretty much every law.
Nira Radia was brought in to “manage”. Fee was Rs 56 crores pa. You can’t manage anything in India. You can only delay it. And you become susceptible to blackmail. The can of worms had been opened. Every day a new one would pop out. And the fire department would have to get to work.
In the end the entire fire fighting department was from one state. And that state began to run the group. Tata Sons didn’t have much to pawn. Their holding in most companies was very small.
By the end of the century. The car was driving at full speed towards the edge of the cliff. But y2k was driving TCS profits making it a cash cow like no other in the group. To draw against these shares, it was better if they were pledged.
In fact now it was even better if they had been sold. The music in the IT industry has stopped and Tata Sons is left holding 70%+ of TCS. A share which can only go in one direction thanks to AI. Cyrus Mistry wanted to sell these to reduce stake to 51%. But couldn’t. Now you can’t sell them. If you do, the share price will tank.
Now even if you pledge all of TCS, you can’t generate enough cash flow to fund the amount required for diversification. There is opportunity everywhere.
But Tatas are stuck with Jaguar, Air India – and soon with a semiconductor plant which will struggle to survive. And capacity to make iPhones – which may stop selling. Apple has failed in AI. And again Tata will be held holding the packet – when the music stops.
TCS is all they have. Really the rest is non saleable, generates little dividend and can’t be sold.
