National Company Law Appellate Tribunal's (NCLAT's) move to restore former Tata Sons chairman Cyrus Mistryas the chairman of the group will trigger a knee-jerk reaction in related stocks and keep them under pressure in the short-to-medium term till there is more clarity on the issue, say analysts.
The NCLAT also termed the appointment of N Chandrasekaran (Chandra as he is popularly known), the current chairman of Tata Sons, as "illegal". He had been appointed the chairman in February 2017. The appellate tribunal gave four weeks to implement its order on Wednesday.
The decision came at the fag-end of the trading session and saw most Tata group stocks react to the development. Tata Motors, for instance, traded near 7- month high in the intra-day deals on Wednesday, ended the day at the top Sensex laggard, down 3 per cent. Tata Global Beverages and Tata Chemicals lost 3.52 per cent and 1.53 per cent, respectively.
“NCLAT’s decision comes as a surprise and will impact the stocks in the near-term. There can be a knee-jerk reaction to the development once the markets open for trade on Thursday. That said, a long-term disruption is ruled out, as each company in the group has a separate management structure and operating environment. Among the lot, TCS, Tata Global Beverages and Titan are on a stable footing. Tata Steel and Tata Motors continue to be impacted due to their global business segments,” said G Chokkalingam, founder and managing director at Equinomics Research.
At the bourses, most Tata Group stocks have been underperformers thus far in calendar year 2019 (CY19). While the S&P BSE Sensex has gained nearly 15 per cent YTD, only Tata Global Beverages, Trent, Titan and Voltas have managed to outperform the benchmark index with a gain of 18 per cent to 42 per cent.
On the other hand, TCS, Indian Hotels, Tata Motors, Tata Chemicals, Tata Steel and Tata Power are some of the marquee Tata group stocks that have underperformed. The S&P BSE Midcap and the S&P BSE Smallcap indices have lost around 4 per cent and 9 per cent, respectively during this period.
“As a business strategy, Cyrus Mistry wanted to prune operations in loss-making entities and that’s where the conflict was. The philosophy of the Tata Group has always been to protect the interest of the employees. Thus, I feel, Tata Motors and Tata Chemicals will remain under pressure at the bourses if Cyrus Mistry was to assume charge, as these two entities remain a sore point for the group. The rest of the businesses are in a relatively stable footing,” said A K Prabhakar, head of research at IDBI Capital.
BSE price in Rs
Name Dec 31, 2018 Dec 18, 2019 % chg
Tata Global Beverages 219.4 311.8 42.1
Trent 361.5 513.3 42.0
Titan Company 930.0 1,158.9 24.6
Voltas 552.5 654.0 18.4
TCS
1,893.6 2,167.3 14.5
Benares Hotels
1,291.7 1,430.0 10.7
Tata Motors
172.6 174.7 1.2
TRF 121.2 119.4 -1.5
Tinplate 148.8 146.4 -1.6
Indian Hotels 147.7 145.0 -1.8
Tata Metaliks 620.6 602.7 -2.9
Rallis 178.8 170.4 -4.7
Tata Coffee 97.1 91.8 -5.5
Tata Chemicals 708.5 643.3 -9.2
NELCO 250.3 226.3 -9.6
Tata Investment Corpn
891.0 804.6 -9.7
Tata Steel
521.9 444.6 -14.8
Tata Elxsi 1,020.7 869.2 -14.8
Automobile Corp of Goa
690.0 545.4 -21.0
Tata Motor-DVR
92.8 73.1 -21.2
Oriental Hotels 44.5 34.4 -22.8
Tata Communications 523.6 395.5 -24.5
Tata Power 76.8 55.5 -27.7
Tata Steel BSL 39.6 28.0 -29.4
Tata Tele(Mah) 4.0 2.4 -40.0
Tayo Rolls 48.3 26.7 -44.8
Artson Engg 49.0 26.8 -45.3
Tata Steel Long Prod 730.3 396.6 -45.7
Automotive Stampings 80.0 31.3 -60.9
Sensex 36,068.3 41,558.6 15.2
Nifty 10,862.6 12,224.6 12.5
BSE Mid-caps 15,438.5 14,789.3 -4.2
BSE Small-caps 14,706.7 13,387.1 -9.0
Compiled by BS Research Bureau
CLICK HERE TO READ FULL TEXT OF THE NCLAT JUDGMENT
The NCLAT also termed the appointment of N Chandrasekaran (Chandra as he is popularly known), the current chairman of Tata Sons, as "illegal". He had been appointed the chairman in February 2017. The appellate tribunal gave four weeks to implement its order on Wednesday.
The decision came at the fag-end of the trading session and saw most Tata group stocks react to the development. Tata Motors, for instance, traded near 7- month high in the intra-day deals on Wednesday, ended the day at the top Sensex laggard, down 3 per cent. Tata Global Beverages and Tata Chemicals lost 3.52 per cent and 1.53 per cent, respectively.
“NCLAT’s decision comes as a surprise and will impact the stocks in the near-term. There can be a knee-jerk reaction to the development once the markets open for trade on Thursday. That said, a long-term disruption is ruled out, as each company in the group has a separate management structure and operating environment. Among the lot, TCS, Tata Global Beverages and Titan are on a stable footing. Tata Steel and Tata Motors continue to be impacted due to their global business segments,” said G Chokkalingam, founder and managing director at Equinomics Research.
At the bourses, most Tata Group stocks have been underperformers thus far in calendar year 2019 (CY19). While the S&P BSE Sensex has gained nearly 15 per cent YTD, only Tata Global Beverages, Trent, Titan and Voltas have managed to outperform the benchmark index with a gain of 18 per cent to 42 per cent.
On the other hand, TCS, Indian Hotels, Tata Motors, Tata Chemicals, Tata Steel and Tata Power are some of the marquee Tata group stocks that have underperformed. The S&P BSE Midcap and the S&P BSE Smallcap indices have lost around 4 per cent and 9 per cent, respectively during this period.
“As a business strategy, Cyrus Mistry wanted to prune operations in loss-making entities and that’s where the conflict was. The philosophy of the Tata Group has always been to protect the interest of the employees. Thus, I feel, Tata Motors and Tata Chemicals will remain under pressure at the bourses if Cyrus Mistry was to assume charge, as these two entities remain a sore point for the group. The rest of the businesses are in a relatively stable footing,” said A K Prabhakar, head of research at IDBI Capital.
BSE price in Rs
Name Dec 31, 2018 Dec 18, 2019 % chg
Tata Global Beverages 219.4 311.8 42.1
Trent 361.5 513.3 42.0
Titan Company 930.0 1,158.9 24.6
Voltas 552.5 654.0 18.4
TCS
1,893.6 2,167.3 14.5
Benares Hotels
1,291.7 1,430.0 10.7
Tata Motors
172.6 174.7 1.2
TRF 121.2 119.4 -1.5
Tinplate 148.8 146.4 -1.6
Indian Hotels 147.7 145.0 -1.8
Tata Metaliks 620.6 602.7 -2.9
Rallis 178.8 170.4 -4.7
Tata Coffee 97.1 91.8 -5.5
Tata Chemicals 708.5 643.3 -9.2
NELCO 250.3 226.3 -9.6
Tata Investment Corpn
891.0 804.6 -9.7
Tata Steel
521.9 444.6 -14.8
Tata Elxsi 1,020.7 869.2 -14.8
Automobile Corp of Goa
690.0 545.4 -21.0
Tata Motor-DVR
92.8 73.1 -21.2
Oriental Hotels 44.5 34.4 -22.8
Tata Communications 523.6 395.5 -24.5
Tata Power 76.8 55.5 -27.7
Tata Steel BSL 39.6 28.0 -29.4
Tata Tele(Mah) 4.0 2.4 -40.0
Tayo Rolls 48.3 26.7 -44.8
Artson Engg 49.0 26.8 -45.3
Tata Steel Long Prod 730.3 396.6 -45.7
Automotive Stampings 80.0 31.3 -60.9
Sensex 36,068.3 41,558.6 15.2
Nifty 10,862.6 12,224.6 12.5
BSE Mid-caps 15,438.5 14,789.3 -4.2
BSE Small-caps 14,706.7 13,387.1 -9.0
Compiled by BS Research Bureau
CLICK HERE TO READ FULL TEXT OF THE NCLAT JUDGMENT
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