In a late evening salvo, Cyrus Mistry camp refuted statements by Tata Group to set record straight in two of its hotel dealings – The Pierre and Sea Rock – terming them as “onerous” and at “high purchase” price.
Tata Group had justified its actions – done before Mistry’s tenure as Tata Sons’ Chairman — in leasing The Pierre, a luxury hotel in New York, and acquisition of Sea Rock hotel in Mumbai.
The group had made its statements — terming the ousted Chairman’s observations as “incorrect and careless” — in Indian Hotels Company Ltd’s (IHCL) annual report.
IHCL runs the Taj Group of hotels.
On lease terms for The Pierre, Mistry’s office termed it as “onerous”.
“The report tries to explain this action and some of the pre-2008 transactions as being adversely impacted by the economic slowdown and bad timing. It also talks about this as a strategic acquisition to build the Taj brand in the US market which is a feeder market for India. This is incorrect and hardly explains evident acts of mismanagement,” it added.
Mistry’s office also stated that IHCL ended up spending over $100 million on renovation, multiples higher than what was originally planned at the time of acquisition.
Further, Four Seasons, the original lessor of The Pierre, continued to lose serious money in running The Pierre hotel in the years prior to 2008 when the US market was strong.
“The strategic rationale for acquiring the Pierre hotel to establish the Taj brand is questionable, especially since the brand architecture executed gives significance prominence to the “Pierre” and is presented as “The Pierre, a Taj hotel.”
On the acquisition of the Sea Rock hotel, Mistry’s office said the price of purchase was evidently way “too high”.
“Besides, regardless of the 2008 crash, this acquisition was housed in an off-balance sheet structure and upon folding it into IHCL, a large impairment has had to be acknowledged,” it added.
“The company has faced a near-death experience and over the last four years has had to take write-downs amounting to nearly its entire net worth. Dividends to the shareholders have been impacted and these decisions have put the welfare of the employees at risk,” it added.