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.View Full Artcile With Comments