FIIs bullish on Tata firms, show faith in Mistry

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Bigger representation on MSCI leads to higher investor interest

Foreign institutional investors (FIIs) have increased their stakes in several Tata companies, reposing confidence in Cyrus Pallonji Mistry who took over the mantle of the group from Ratan Tata last month. Tata had been at the helm for over two decades.

FIIs raised stakes in Tata Consultancy Services (TCS), Tata Motors, Tata Steel, Tata Chemicals and some others in the December quarter at the end of which the change of guard took place at the Bombay House.

Experts say “bulge bracket” investors usually take note of top-level changes in most companies they invest in. This is true also of the Tata companies.

By way of example they point to Apple, whose share shed 0.7 per cent the day after Steve Jobs resigned in August last year due to failing health. Jobs handed the baton to long-time lieutenant and chief operating officer Tim Cook. Jobs had co-founded the company in 1976 and led it since 1996.

Experts say that the FIIs possibly took positive note of the fact that Mistry’s family is a large shareholder in Tata Sons and that he himself had earlier held a position on the Tata holding company’s board.

Mistry was groomed for the top job for more than a year after being named the successor to Rata Tata in November 2011. This gave the FIIs enough time to analyse and take a call on the group firms.

A survey of 20 listed Tata companies which declared their shareholding patterns during October-December shows that FIIs increased stakes in 13, including Titan Industries, Indian Hotels and Tata Power, besides the four companies mentioned earlier.

Only in three Tata companies -- Voltas, Rallis India and Mount Everest Mineral Water -- the FIIs’ stakes saw small drops.

Prithvi Haldea, managing director of Prime Database, does not agree that the stake increases are a reflection of FII assessment of the efficacy of the new Tata management. “It’s too early to decide the competence or incompetence of the new management,” he says. “The FIIs’ continued interest has more to do with overall market attracting money,” adds Haldea.

Clearly, however, they have not given a negative note to the new. Life is quite normal at the Tata group. “When life is not normal and there is major corporate action, like an acquisition, then people will start taking note of the performance of the new management,” says Haldea.

Data indicate that in TCS, the largest Tata company by market capitalisation, the FIIs’ unwavering support continued, their combined stakes rising from 14.83 per cent at the end of calendar 2011 to 14.96 per cent last month.

FIIs brought in a lot of money ($24 billion) in the last calendar; so it was only to be expected that some of that money would have gone into buying Tata shares. The point to note is that FII money went into group companies across various sectors.

Besides TCS, other Tata companies that saw FII stake rise in calendar 2012 are: Tata Motors (28.47 to 29.01 per cent), Tata Steel (14.71 to 14.79 per cent), Tata Power (23.45 to 24.95 per cent), Tata Chemicals (15.86 to 17.24 per cent), Titan Industries (17.32 to 18.30 per cent), Tata Communications (2.46 to 2.77 per cent), Trent (13.59 to 13.94 per cent), Indian Hotels (13.78 to 14.43 per cent), Tata Teleservices (0.55 to 0.65 per cent), Tata Global Beverages (16.52 to 19.13 per cent), Tata Motors DVR (44.56 to 45.35 per cent) and Tata Elxsi (1.65 to 1.78 per cent).

Avinash Gupta, financial advisory leader of Deloitte in India, says it is not about a ‘specific name’. The FII money has come across the board. FIIs like sovereign funds and pension funds track indices like MSCI and allocations depend on countries weight in the index.

“Since the Tata group is large it has a bigger representation in the index. If your representation in the index is good, there will be higher FII purchases in group companies,” Gupta explains.

The FII shareholding dropped in three companies as follows: Voltas (22.55 to 21.65 per cent), Rallis India (11.85 to 10.80 per cent) and Mount Everest Mineral Water (1.76 to 1.52 per cent).


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