Three weeks after Cyrus Mistry was ousted as chairman of Tata Sons, the stocks of Tata Group companies continue to languish, reports fe Bureau in Mumbai. A clutch of 26 companies of the group has seen its market capitalisation fall by R1 lakh crore since October 24. During the same period, the Sensex has lost 6.7%.
Investors fear that the boardroom battle in the Tata Group could adversely impact the performance of the companies — for instance, a quick resolution to the problems at Tata Steel, which is trying to sell the European business.
Investors are also concerned that at some companies, the finances may not be in good shape. Mistry, corporate watchers say, had shown himself to be far more mature than his years. Despite inheriting an unwieldy and largely unprofitable legacy — including white elephants such as Corus and Tata Teleservices, both of which were leveraged to the hilt — he went about his task quietly, systematically pruning assets and adding capacity where needed.
In detailed replies to allegations by Tata Sons of the financial performance of group companies not having been up to the mark, Mistry has pointed out the capital employed in legacy hotspots — Indian Hotels, the passenger vehicle segment at Tata Motors, Tata Steel Europe, Tata Power Mundra and Tata Teleservices — has risen from R1,32,000 crore to R1,96, 000 crore due to operational losses, interest and capex. A realistic assessment of the fair value of these businesses could potentially result in a write down over time of about R1,18,000 crore.