A double whammy for Tatas in big duel
Dateline Bombay House: Tata cos lose thousands of crores following post-Mistry tussle & demonetisation
Tata Group stocks took a big knock on their market capitalisation in the aftermath of the removal of Cyrus Mistry as the chairman of Tata Sons by the Tatas led by Ratan Tata.
However the market cap fall has narrowed down to 7.80 per cent from the earlier 15 per cent as it now stands at Rs 67,975.30 crore as on December 30, 2016 compared to a negative of Rs 1.15 lakh crore in the third week of November. The Tata Group’s market capitalisation of 27 constituent listed entities stood at Rs 8,03,297.96 crore as on December 30 as against Rs 8,71,273.30 crore on October 24, 2016.
The Tata Group’s total market capitalisation had fallen to Rs 7.5 lakh crore in the third week of November.
While the Tata Group’s internal battle led to a fall in the stock prices of group companies, the November 8, 2016 announcements on demonetisation led to a double whammy for some Tata Group companies. The worst hit were Titan, Tata Motors and Tata Steel as consumers postponed their purchase plan in the wake of the cash crunch and only essential purchases were made during the wedding season.
The biggest hit to the market capitalisation of Tata companies was to Tata Motors as its market capitalisation is down by Rs 28,597.09 crore. Tata Motors DVRs’ market cap is also down by Rs 3261.88 crore, Tata Consultancy Services’ market cap has also taken a hit of Rs 12,985.12 crore but it’s not much given the huge market cap of Rs 4,65,405 crore as per capitaline data.
Titan has been hit worse as its market cap has fallen by Rs 4,567.66 crore or 13.63 per cent, down to Rs 28,919.63 crore on December 30, 2016 from Rs 33,487.29 crore as on October 24, 2016. Such a sharp fall has happened largely due to the impact of demonetisation, experts said.
However, another Tata Group company Indian Hotels’ market capitalisation has been hit by the internal tussle, as it came out in the public through Cyrus Mistry’s allegations that buying Sea Rock Hotel in Mumbai’s Bandra area was a financial drain on the company. “IHCL has had to write down nearly its entire net worth over the past three years. This impairs its ability to pay dividends,” Mistry alleged.
Indian Hotels’ market capitalisation is down by 24.31 per cent or 3,121.16 crore from Rs 12,835.83 crore to Rs 9714.67 crore.
Similarly, Mistry pointing out that Tata Motors’ Nano car project has consistently lost money, peaking at Rs. 1,000 crore, led to huge negative impact on the stock price. Tata Motor’s market capitalisation is down by 15.88 per cent.
Despite the fall in stock price some of the Tata Stocks’ returns in 2016 were outstanding with Tata Steel being the top Sensex gainer with a return of 52.53 per cent while Tata Motors gave a return of 17.20 per cent. Only three companies gave higher return in the Sensex pack in 2016.
An analyst from a top broking and investment banking firm requesting anonymity said, "These are companies that are supposed to have the highest standards in corporate governance, this fall in market cap is the biggest worry of investors. Markets have not re-rated these stocks based on tussle within the group but also based on impacts of demonetisation."
"The improvement of outlook on these stocks is a long term process, but if stocks are fundamentally sound why investors should not buy," the analyst said.
Ravi Ranjan Prasad