Cyrus Mistry's maiden Tata Steel AGM: Shareholders pose tough questions

MUMBAI: Cyrus Mistry today faced some tough questions in his maiden Tata Steel AGM as company chairman with some shareholders wanting to know why dividend payout was lower even though salaries of top management rose.

Tata Steel's dividend per share has declined by 50 per cent in last 6 years to Rs 8, the shareholders said, while pointing out that it was Rs 16 in 2007-08.

One of the shareholders, Adil, even insisted for vote against the proposed dividend and demand discussions. He, later, withdrew his demand after being persuaded by the management and other shareholders.

"I want a poll and discussion. you are giving a lollipop (to the investors)... Your salaries keep going up," he said to the company management.

Replying to shareholders' concerns, Mistry said that the company has been going through a bad phase due to continuous slump in global steel demand, which had led to significant decline in company's net profit.

"I think we need to understand what stage the company is in today. The company is in a volatile market at the low end of the steel cycle and at the same point in time, it is going through a massive expansion. We have to conserve capital for the expansion that is ahead of us," he said.

He further said that "notwithstanding all of that, the Board took a decision to bring down the dividend in a minor way. (This was) just to reflect an indication of the environment we are in, without impacting the shareholders significantly."

Tata Steel's Board had recommended a dividend of Rs 8 per ordinary share of Rs 10 to 97,12,15,229 company shareholders for 2012-13. According to company's annual report for the last fiscal, total dividend payout will be Rs 776.97 crore and would amount to 18 per cent of its standalone net profit for 2012-13 (at Rs 5,062.97 crore).

Mistry, who took over the baton from Ratan Tata in December to lead Tata Sons, also said that there is a need to rationalise some of the subsidiaries of Corus (now Tata Steel Europe) as the losses incurred by it has accumulated to Rs 10,000 crore in 5 years.

He, however, did not elaborate further. Mistry also said that next 18 to 24 months will be challenging for the company due to volatile raw material prices and systemic weakness in demand in key markets.

However, the company will emerge stronger due to series of initiatives taken by the management, targeting strengthening of core operations, product rationalisations and "right-sizing of manufacturing assets," he said.