Tata management shake-up could slow group’s debt reduction process

0
122

NEW DELHI/MUMBAI: Tata Sons‘ shock move to oust Cyrus Mistry and his core team of advisors and bring back Ratan Tata as chairman of the salt-to-software conglomerate could lead to delays in the group’s bid to reduce its debt load across its businesses, analysts say.

The stunning boardroom coup, announced late on Monday, sent shares in some of Tata’s major listed entities lower on Tuesday, despite the company’s attempt to calm the waters by bringing a well-known and widely respected hand like Ratan Tata back to the helm.

Shares in Tata Steel were down 2.2 percent, Tata Consultancy Services fell 1.1 percent, Tata Motors dropped 1 percent while Tata Power was down 1.4 percent. The broader NSE index was down 0.2 percent at 0638 GMT.

“Under Mistry, Tata Group have taken significant steps towards deleveraging and better utilisation of capital over the last few years,” Citigroup said in a note circulated to internal clients on Tuesday.

Company Name Price Change
(from 28-12-12)
% Change
(from 28-12-12)
Tata Metaliks Ltd. 406.65 344.85 558.01
Tata Elxsi Ltd. 1316.00 1086.45 473.30
Voltas Ltd. 395.30 290.20 276.12
Tata Communications Ltd. 656.00 419.15 176.97
Tata Sponge Iron Ltd. 622.05 311.60 100.37
Indian Hotels Company Ltd. 124.95 61.85 98.02
Tata Consultancy Services Ltd. 2400.30 1132.80 89.37
Nelco Ltd. 93.85 42.50 82.77
Tata Motors Ltd. 554.50 244.45 78.84
Tinplate Company of India Ltd. 88.20 36.05 69.13
Tata Chemicals Ltd. 562.00 212.30 60.71
Trent Ltd. 203.75 75.42 58.77
Rallis India Ltd. 232.45 82.20 54.71
Titan Company Ltd. 371.00 89.85 31.96
Tata Investment Corporation Ltd. 611.40 147.75 31.87
TRF Ltd. 280.15 55.50 24.71
Tata Steel Ltd. 416.55 -12.00 -2.80
Tata Global Beverages Ltd. 150.15 -10.30 -6.42
Tata Coffee Ltd. 131.00 -9.22 -6.57
Tata Power Company Ltd. 82.90 -26.35 -24.12
Tata Teleservices (Maharashtra) Ltd. 7.70 -3.02 -28.18

“His absence going forward may impact the future strategy and thereby may delay the process of deleveraging and RoCE (return on capital employed) improvement at the group levels.”

Bank of America Merrill Lynch analyst Sanjay Mookim said in a note to clients the decision could indicate that the board is looking for a change in group strategy.
Initial media reports following Mistry’s ouster indicated that the Tata family, which retains a roughly two-thirds stake in Tata Sons through a series of trusts, were unhappy with some of Mistry’s decisions at the helm of the company, whose business empire stretches from Jaguar Land Rover cars and steel mills to aviation and salt pans.

A source familiar with the matter, who was not authorised to discuss the issue publicly, told Reuters that Mistry’s departure was deliberated over months and was a result of a difference of opinion between him and the board, without elaborating on the differences.

Tata has also disbanded the group executive council (GEC), a team of core advisers that Mistry had formed.

The 48-year-old had been trying to shake up the $100 billion company by changing its management structure to bring in new faces at senior levels.