Former Tata Finance MD-Dilip Pendse

Jul 16 2017 : Mirror (Mumbai) Dilip Pendse's unlikely journey Makarand Gadgil & Murali K   From Dombivali to Bombay House The vada-pav loving former Tata Finance MD, who committed suicide last week, was the unlikeliest executive to ever occupy a corner office at the Tata headquarters On the morning of April 12, 2001, the Securities and Exchange Board of India received a fax that detailed financial chi canery allegedly committed by Tata Finance's managing director Dilip Pendse. The fax, signed by Shankar Sharma -the exact identity of the person remains a mystery -was also sent to top Tata officials and business journalists. The Tata Group rubbished the letter; it was seen as an attempt to malign Pendse, Ratan Tata's right-hand man and a rising star in the group. The Tata Group, in fact, published advertisements in newspapers that termed the letter malicious, says Girish Kuber, author of Tatayan, which traces the history of the group from the late 1800s to Cyrus Mistry's grand coronation in 2012. “It spoke volumes of the trust Tata Sons chairman Ratan Tata had in Pendse.“The meteoric rise and sudden fall of Dilip Pendse, who committed suicide earlier this month, is often seen as a cautionary tale, but within that tale is a story that is as interesting, and it is about a man who came out of nowhere to occupy a prized corner office at the Bombay House, a place where managing directors almost always smell of old money, have attended Ivy League schools and are residents of tony pin codes. (To put that into context, former Tata satraps Russi Mody played the piano, while Ajit Kerkar is an art aficionado). Pendse, on the other hand, came from the teeming, claustrophobiainducing urban sprawl of Dombivali, nearly two hours away from the Tata Group's genteel HQ. His father was a small-time businessman. Pendse studied at a vernacular-medium school in Dombivali, and graduated from the Mulund College of Commerce in 1976.He would later also study company secretaryship and law. Over time, he also picked up the habit of chewing tobacco.“He always had a spittoon in his office.Imagine that in Bombay House?“ says a former finance professional who worked with Pendse in the late 1980s. So, how did the tobacco-chewing Pendse become the managing director of Tata Finance even before he turned 40? The answer to that, at least partly, can be found in Ratan Tata's determined campaign to cut Russi Mody, Ajit Kerkar and Darbari Seth to size in the decade between the late 1980s and 1990s. When Ratan Tata, who was appointed chairman by JRD Tata in the early 1980s, wanted the group to expand into newer areas such as information technology and telecommunications, he was met with much resistance. The ambitious men who opposed him, while being mostly loyal to JRD, were unimpressed with his successor. The wily and suave Seth headed Tata Chemicals and Tata Tea; then, there was Mody, the chairman and managing director of Tata Steel; and Kerkar, who was handpicked by JRD in London in the 1960s to turn around the for tunes of the Taj and who is regarded as one of the best hoteliers of his generation. In his fight against the satraps, Ratan Tata needed generals, lieutenants and allies, and one among them was Dilip Pendse. “Dilip and I were friends in school, and he was always a brilliant student.He was a true blue Maharashtrian boy ­ he loved vada pavs and shrikhand and Marathi plays. He had a head for numbers, but his rapid rise, especially as head of Tata Finance, came as a surprise to many,“ says his close friend Shishir Deshpande. A lot has been written about Pende's financial acumen, and while he was good at making the right calls on the stock market, he was an even better legal brain and loved getting into details. “He could carry people with him; he was tenacious, and direct and brutal when the situation called for it.He could get things moving,“ said a former banker, who did not want to be identified. Pendse, who joined the Taj Group in the late 1970s and worked as a company secretary, first met Tata around the same time, and the latter was impressed by his brisk style of functioning and no-nonsense attitude.“Pendse's adroit handling of the socalled Indira Gandhi Pratibha Pratishthan crisis was the turning point,“ said the banker. Cement was a precious commodity in the Licence-Raj ridden 1980s, and builders and contractors needed government permits to buy it. Quite naturally, they greased the palms of bureaucrats and politicians to ensure a good supply. In the 1980s, A R Antulay, the then Maharashtra chief minister, launched the Indira Gandhi Pratibha Pratishthan. The trust, ostensibly set up to promote talent, was used by Antulay to allot cement quotas, and when the whole affair came to light, it cost Antulay his job. Ajit Kerkar was the secretary of the trust, and Pendse, who was a middlelevel company secretary at the time, used to accompany him to the trust's meetings. “He used to keep detailed minutes of each meeting (of the trust), and the minutes of these meetings and his advice to the group's lawyers helped keep the taint off Kerkar,“ said the banker. Not soon after, Ratan Tata decided Pendse would work for him, and he was brought into Bombay House. Ratan Tata's hunch about Pendse was right, and over the years, he was parachuted in and out of situations to control damage. And he was an extremely crucial ally in Ratan Tata's pitched battle against Mody over control of Tata Sons.The protracted fight would eventually see Ratan Tata eject Mody out of Tata Sons, and the ammunition for one of the many salvos he fired at the garrulous, omelette-loving Tata Steel head was sourced by Pendse. “He was good at digging dirt, he could sniff it out,“ the banker told Mirror. The dirt in this instance concerned Mody's import of luxury cars. In the 1980s, high quality coal, which was required for steel factories, was unavailable in India, and had to be imported from Australia. Mody, it is alleged, would pocket a hefty commission on the purchase of coal. Once, using the money he had acquired as commission, he imported twelve, highend Mercedes cars as gifts to his friends in high places. The Enforcement Directorate (ED), which got a whiff of the deal, initiated an enquiry into the import of the cars. It is believed that the tip-off came from Pendse, and details of the ED's investigations would be conveyed to Ratan Tata. In 1990, when the Tatas firmed up their plan to start a non-banking financial company (NBFC), Pendse was picked by Ratan Tata to be on its board as an executive director. Six years later, he was elevated to managing director. “Pendse and Tata were very close.They would meet every Wednesday for about 30 to 45 minutes. They would not only discuss the affairs of Tata Finance, but the entire group,“ says Harmesh Nagi, a close friend of Pendse's and his lawyer. At one point of time, Pendse was on the board of 18 Tata group companies.“In fact, he told me that when Cyrus Mistry first became a director of one of the Tata Group companies in the mid1990s, he (Pendse) signed his letter of appointment.“ According to Deshpande, despite the success he achieved, Pendse “remained a middle class person at heart.“ “That is why, instead of choosing posh localities like Colaba or Malabar Hill, he decided to buy an apartment in Dadar.“ Just when it looked like things were going swimmingly well for Pendse, came Shankar Sharma's letter. The fax arrived at a time when Tata Finance had just come out with a Rs 90 crore rights issue, and while the red herring prospec tus claimed things were hunky-dory at the company, Sharma's letter claimed otherwise. SEBI swung into action and started investigating the matter. In his letter Sharma alleged that about Rs 300 crore had been diverted from Tata Finance to Nishkalp Investment and Trading, a little-known subsidiary, between 1999 and 2001.Nishkalp used the money to buy stocks of the then so called new economy companies such as Himachal Futuristic, Global Telesystems, and Veerangana Software. Following the dotcom bust of 2000, the value of Nishkalp's investments in the companies had dropped drastically, the letter said. The Tata group appointed audit firm A F Ferguson to conduct an inquiry into the working of Tata Finance. In a 900page report, Ferguson's senior partner Y M Kale accused Tata Group companies of buying each other's shares, diverting rights issue money to Nishkalp, and highlighted the lack of corporate governance in the group's companies. The Tatas rejected the report, claiming it to be skewed and authored with a vested interest. The report was then hurriedly withdrawn by Ferguson, and Kale was asked to step down as a partner in the company. In a board meeting on April 30, 2001, Pendse revealed that it was pointless to try and recover the money -­ about Rs 433 crore ­ routed to Nishkalp, as the investments had proven to be duds. As this information was not available to investors at the time of its rights issue, SEBI asked Tata Finance to give an option to investors to return their money if they asked for it. Tata Finance also came under fire from the Reserve Bank of India, as, in the process of `loaning' money to Nishkalp, it had flouted the apex bank's norms for NBFCs to maintain a statutory liquidity ratio.According to those in the know, Pendse had by then, in his usual brisk manner, tried to demerge Nishkalp from Tata Finance, so that the former's losses were not seen on Tata Finance's books. But, for once, there were too many things to be pushed under the carpet. Pendse and other board members of Tata Finance were also charged with insider trading. Nishkalp chairman J.E.Taulalicar allegedly sold 1,00,000 shares of TFL at a price twice that of the prevailing market price (Rs 33) on March 30, 2001. Allegedly, Pendse himself facilitated the deal, and to justify this high sale price, the transaction was backdated to September 2000 when the share price was higher. In his book Tatayan, Kuber writes, “Pendse's move to demerge Nishkalp from Tata Finance proved to be proverbial last straw on the camel's back.Ratan Tata, who cared more about the Tata brand and trust of the common man, felt that it was a betrayal of the depositors who had reposed their faith in the company. And Pendse was asked to step down.“ Subsequently the Tatas lodged a complaint with Mumbai Police's economic offences wing against Pendse.While Pendse was given a clean chit by the cops, he was arrested by Delhi Police in 2003 on a complaint lodged by Inshallah Investments, another Tata Finance subsidiary, which claimed that he issued cheques from the company to settle his personal dues to brokers.Pendse was released on bail after nearly 11 months in jail . However, court cases, both criminal and civil, continue to drag till date. In the mid-2000s, Tata Finance was merged with Tata Motors, while another NBFC Tata Capital, took the former's place. After his dismissal from the company Pendse joined a logistics firm as its executive director. “He always stuck to a routine. I could never gauge how much the Tata Finance episode affected him, because he never spoke much about it,“ says Pende's lawyer Nagi. Both Nagi and Pendse's son Sagar claim that he was made a scapegoat.“Tata Finance was not some small company in which the wishes of one person prevailed. All decisions were taken by its board and other committees, so everyone knew what was happening.“ And, they are not alone in holding this view.Several bankers and former NBFC heads told Mirror that there was more to it than met the eye. (The Tata Group declined to participate in this story.) “I'm certain he got a little greedy and foolish, but definitely a single man can't be blamed for this kind of rot,“ says a stock broker and financier. “When I met him in the mid-2000s, he told me he would always be loyal to the Tatas.`They gave me my livelihood,' he told me. He never did speak out against them.“ And, with his death last week, that is how it will always be.