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Indian Hotels: Ajit Kerkar Controversy
Excerpts
The Allegations Against Kerkar
The negative attitude of the Tatas toward the hotel business forced Kerkar to raise funds in his private capacity. Kerkar took the help of a group of investors, including the biscuit and cashew millionaire Rajan Pillai, for the Goa venture. The Tatas had just 6% of the equity in the venture.The Taj in Chennai and the Malabar Hotel in Kerala were built with the help of another group of investors. Kerkar later claimed that from the very beginning he wanted all the companies belonging to the Tata group to take large stakes in each of the hotels so that they remained forever secure as Tata entities. In the 1980s, Kerkar used the same financial strategy that he followed in India to set up hotels in the UK and the US. These complex financing arrangements resulted in many companies with interconnected loans and exposures, and minimized the equity control of IHCL and the Tatas over the Taj group. It also became one of the major charges against Kerkar's corporate governance...... |
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The End of the Kerkar Era
Kerkar's troubles started when Ratan Tata took over as the head of the Tata Empire. Unlike his father JRD Tata, Ratan Tata proved to be less trusting of his managers. As the Tatas had never helped Kerkar in any way - financial or otherwise, Kerkar commented that he didn't need Ratan Tata to start telling him how to run his business. Later, Ratan Tata also came up with the rule that all the affiliates in his empire should pay a hefty sum for using the Tata brand name, Kerkar didn't accept this ruling. Kerkar also refused to incorporate the Tata name in the IHCL brand name. Following this, the Tatas were keen to replace Kerkar.
Exhibits
Exhibit I: Chronology of Events
Exhibit II: Cogentrix Power Project
