Tata's alleged governance lapses said to be probed by India

[MUMBAI] India's market regulator is looking into the boardroom tussle at the Tata Group for possible breach of corporate governance rules and listing regulations by companies in the salt-to-software conglomerate, two people with knowledge of the matter said.

The Securities and Exchange Board of India is examining the letter written by ousted chairman Cyrus Mistry that alleged financial irregularities and lapses in corporate governance, the people said, asking not to be identified as they aren't authorised to speak on the subject. The regulator will also check if companies made timely and adequate disclosures, the people said.

Tata Group companies have lost at least US$3.3 billion in market value since Monday when Mr Mistry was abruptly replaced by his predecessor Ratan Tata. Tata Steel Ltd has retreated more than 6 per cent from last week when it reached the highest price since December 2014, while Indian Hotels Co is set for its worst week since August 2013.

Tata Motors Ltd, owner of Jaguar Land Rover, has lost 3 per cent of its value since Monday.

"Governance at Tata can improve due to regulatory scrutiny but the process will be long drawn and will lead to further deterioration of its market capitalisation," Manoj Nagpal, chief executive officer at Mumbai-based Outlook Asia Capital Pvt, said by phone. "If regulators insist, Tata can't just brush off charges without factually rebutting each one of them."

The market regulator is going through stock-price data to examine compliance with insider-trading rules and monitoring social media for disclosure of market-sensitive information, the people said. It has directed the National Stock Exchange of India Ltd and the BSE Ltd to report unusual price and volume data in Tata companies.

A Sebi spokesman didn't respond to an e-mail and a phone call seeking comment.

Mr Mistry, who has been chairman for almost four years, was abruptly removed from his role on Monday for non-performance without the opportunity to defend himself, the executive wrote in an e-mail on Tuesday to the group's board.

He accused directors of wrongfully dismissing him and warned that the group may face US$18 billion in writedowns because of five unprofitable businesses he inherited.

BLOOMBERG