Rs 1 lakh crore shaved off Tata group cos' m-cap since Mistry's ouster

Investors poorer by Rs 11,000 crore in Tata shares

Tata group companies have seen a combined market capitalisation erosion of 15 per cent, or nearly Rs 1.16 lakh crore, in the past one month. Retail investors in the group companies have become poorer by about Rs 11,000 crore from the day the sacking of group chairman Cyrus Mistry was announced.

Before the dispute came to light, the Tata group commanded an overall market cap of Rs 8.7 lakh crore; that value is now down to Rs 7.5 lakh crore. Not a single company has been left unimpacted. Maximum value erosion has been seen in TCS, Tata Motors, Titan and Tata Steel.

"We are asking investors to avoid any fresh buying in Tata group stocks because of the internal dispute and the need for clarity on the new leadership," said Dharmesh Kant, head - retail research, Motilal Oswal Financial Services. "The allegations are related to corporate governance, which is looked down by most institutional investors. And although nothing has been substantiated or proved, the dispute will have an overhang on the stocks," he added.

The shares of several Tata group companies have also underperformed their peers. For instance, TCS (11 per cent) has fallen more than peers Infosys (10.5 per cent) and Wipro (7.4 per cent) in the past one month. Tata Steel (8 per cent) has lost more than SAIL (1.8 per cent). Tata Motors (16 per cent) has lagged Maruti Suzuki (14.5 per cent) and Mahindra & Mahindra (11 per cent). The benchmark BSE Sensex has fallen about 7.5 per cent in the same period.

Experts, however, believe that the prospects for the individual companies will not be the same across the board. "The trend is not expected to continue for long as the stocks are already beaten-down. So I expect the noise from the internal dispute to have only a marginal impact," said G Chokkalingam, founder, Equinomics Research & Advisory.

According to him, the impact of demonetisation will have more of an impact on the stocks. Chokkalingam reckons that firms such as Tata Steel, Tata Chemical and Titan will be the most impacted by demonetisation, while TCS, Tata Global Beverages and Tata Power may be the least impacted.

Tata Steel is already facing headwinds on account of the glut in global supply of steel, which has put pressure on prices. With demonetisation set to impact the real estate sector and construction activity in the country, the company is likely to face pressure back home as well.

Titan will be impacted in the third quarter as consumers scrimp on purchase of discretionary items such as watches and jewellery. Tata Chemicals will face a similar pressure this quarter as the fertilisers business is a cash-centric business.

While the stocks are likely to remain volatile in the near term those with a five year view can put money in some stocks. "While the fund managers have taken cognisance of the controversy, some may use the opportunity to buy individual stocks depending on valuations and business outlook," said the chief investment officer of a top fund house, on condition of anonymity.

"From a long term perspective, one may look at Tata Motors as its Jaguar and Land Rover business is expected to remain intact. Also, as the effects of the seventh pay commission kick in and things normalise six to seven months down the line, its domestic business may get some relief," said Kant. "With the rupee depreciating, TCS can be a kind of a trading bet but it is unlikely to give stellar returns in the coming months," he added.