Tata Group Stocks Move Uphill Post Management Changes

Some key Tata Group stocks have outperformed Sensex and Nifty in the one year since the ouster of Cyrus Mistry as the Tata Sons chief. Tata Sons chairman N. Chandrasekaran is making rapid strides on the operational front to resolve some of the issues that had been a drag on the group’s performance. Since appointment of new chairman, the market capitalization of listed Tata group companies has gone up 2.47% as of date, to Rs8.93 trillion, according to data from Capitaline. During the same period, the market cap of the benchmark Sensex index has gained 15.36%

Rising commodity prices, share buybacks and successful restructuring in Tata Teleservices and Tata Steel have given investors’ confidence that the group may be able to put aside past trouble. Chandrasekaran has been making many key changes to company since the day he took charge that has led to the company’s current development. The Tata group is looking to drastically prune the number of companies in its portfolio and take tough calls on non-performing, debt-laden firms and bring greater financial discipline, Chandrasekaran told CNBC-TV18 in an interview on 9 October.

Some of the key moves that have been made so far which led to current development in various companies under the group include:

  • Approval to a legal settlement with Japanese partner NTT DoCoMo.
  • Disentangling the complex cross-holdings of group companies.
  • Taking tough calls on troubled debt-ridden units such as Tata Teleservices Ltd and Tata Steel Europe by merger of Tata Steel Europe with ThyssenKrupp and sale of as Tata Teleservices Ltd to Bharti Airtel.
  • Executing the plan by Tata Sons to convert itself into a private limited company from a public limited one, while hardening the stand-off between Tata Sons and the Shapoorji Pallonji family to which Mistry belongs, has effectively blocked the latter from selling its 18% stake in the holding company.

Chandrasekaran has formed a core team to steer the restructuring of the group companies with focus on working towards better capital allocation by consolidating the group’s myriad businesses with expectations of delivering greater shareholder returns in future. The chairman told CNBC-TV18 in an interview “The Tata group is looking to drastically prune the number of companies in its portfolio and take tough calls on non-performing, debt-laden firms and bring greater financial discipline”.

The plan that involves rationalization of the portfolio is to create five-seven clusters, besides the three behemoths: Tata Consultancy Services Ltd, Tata Motors Ltd and Tata Steel Ltd. Different entities serving the same function will be merged to create a cluster of companies around infrastructure, defense, consumer goods, finance and travel to help management strengthen its presence in existing segments and facilitate swift & agile implementation of new decisions.

The moves made by new chairman have helped many Tata group stocks improve drastically with public and investor sentiment on company growing positive by the date. This is evident in rapid improvement of stock value for various companies.  While performance of the passenger cars segment and growing competition in the trucks business have weighed on Tata Motors and Tata Power has been hit by problems at Mundra and the general downtrend in the sector other major companies under the group has seen significant improvement. Various companies under group such as Tata Steel, Titan, Tata Chemicals, Tata Global Beverages, Tinplate Co, Tata Metaliks, Tata Sponge Iron, Voltas and Tata Elxsi have gained around 27.5%-204.2% since ousting of previous chairman last October.

The above image, sourced from the Economic Times website, contains details of change in the stock value for various companies under Tata Group during the period of “October 2016 to October 2017”.
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HDFC Bank reports Q1 reults

HDFC Bank, India’s largest private sector lender has reported a stellar Q1 performance. Net profit grew 20.2 percent year-on-year to Rs 3893.84 crore despite an increase in provisioning. Net Interest Income (NII) increased by 20.4 percent to Rs 9370.4 crore.

Advance during the quarter registered 23.4 percent growth to Rs 5.8 lakh crore, with retail loan growth at 21.9 percent and wholesale loans at 25.5 percent. Deposits increased 17.1 percent to Rs 6.71 lakh crore year on year.

Asset quality has been impacted due to the loan waiver to farmers announced by the state government. Gross Non-Performing Asset (GNPA)  stands at 1.24 percent against 1.05 percent on March 31st, 2017. Of the total NPA, 60% is accounted for the agriculture sector. Net NPA stands at 0.40 percent at Rs 2528 crore.

Technical Analysis of HDFC Banks indicated a strong momentum in the stock. MACD line is crossing over the red line indicating an upward movement.The stock is trading at Rs 1,733.55 up by 1.81% after the announcement of result. The stock has been trading near its 52-week high of Rs 1748.00 and has given a return of more than 40% YTD.

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Downfall of a Market Heavyweights

ITC shares took a deep dive downtrend in its market value as market opened today morning, this is a result of GST council made corrections to initial announcement and  increased the cess value for cigarette which took away around INR 5000 crores in annual windfall which the manufacturers would have reaped out of earlier low cess value for cigarettes in GST. The downfall has been steep and fast such that within few minutes after market opened the stocks went down by about 11% which greatly contributed to nifty’s downtrend movement today.

This can be seen as one of the most severe downtrend movement of any stock in the last decade. As one of the major share holders of ITC with a 11.9% stakes ownership LIC suffered huge losses and took a down trend movement with a decline of 0.23% in market value.


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Nifty Major Players

Nifty 50 has maintained its bullish trend through out the morning session with an increase of around 0.40% value and the same was influenced greatly by positive trend in Nifty automobile, Nifty IT and Nifty cement sectors.


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