Mistry spat not only reason for loss in Tata group mcap: SES

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26 Aug, 2025 12:21

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Moneycontrol BureauMarket capitalisation of Tata Group companies have taken a beating post the removal of Cyrus Mistry as Tata Sons Chairman on October 24, 2016. The manner in which this boardroom battle unfolded raised many questions on Tata Groups corporate governance ethics and made investors jitter with respect to the group's future.Most analysts have linked this fall to governance issues raised by Cyrus Mistry post his removal but proxy governance firm Stakeholder Empowerment Services (SES) is of the opinion that the fall in market cap or investors loss is largely due to other factors rather than governance issues, which seem to have marginally impacted selected companies.In its report analysing the price trend of Tata Group companies since this whole fiasco started, SES has found that Between October 24, 2016 to January 13, 2017, the 22 listed companies of the group lost market cap of Rs 56,938 crore. Therefore it can be said that investors including Tata Sons were poorer by Rs 56,938 crore. Of this loss, Rs 27,822 crore can be attributed to movement of Sensex during this period and the remaining Rs 29,116 crore can be traced to  company specific reasons."As Sensex traces movement of only 30 shares, it is not a representative index for group of 22 companies, which have diversified business. Therefore movement of each company was mapped against its sectoral index also. Of the loss of Rs 56,938 Crore, Loss of Rs 21,206 crore is attributed to sectoral index movement and Rs 35,731 is on account of company specific issues," the analysis says.It further divides the companies into two groups, one where Cyrus Mistry was chairperson and others where he was not.Out of Rs 56,938 crore loss, around Rs 52,520 crore is attributed to the 7 companies where Mistry was chairperson, which is almost 92.2 percent of total market cap loss.In percentage terms, in companies where Mistry was chairperson, the decline is 7.09 percent and for the rest 15 companies loss is 4.80 percent. The data indicates that impact is more pronounced in companies where Cyrus Mistry was chairperson compared to others."Does this mean that these 7 companies have suffered on account of exit of Mr. Mistry? Further analysis proves that losses are mainly related to issues at individual company level rather than governance issues," the report says."Non indexed loss of Rs 35,732Crore has been further analysed. The loss can be attributed to poor results, demonetisation, company specific and governance issues. However most of the non index loss was in 7 companies where Mr. Mistry was chairperson. Of this, maximum was in TCS at Rs 24,534 crore, almost 67 percent of unexplained loss."

"This loss certainly was not on account of governance issues. TCS was mainly impacted by H1B Visa issues and future negative perception about the business. Other main loser were Tata Motors and Tata Power, which accounted for about 12 percent and 6 percent of non indexed loss. Tata Motors has been partially impacted by demonetisation as well," the report says.IHCL and Tata Global lost maximum, 21 percent and 17 percent respectively, compared to their October 24 price. As these companies do not have significant market cap therefore their impact is not felt in overall loss."The data does not support that the market cap loss is prominently due to governance issue. Maximum governance issues were raised in case of Tata Steel. However, Tata Steel is the only company amongst 7 companies whose market cap has increased, although it has lagged its sectoral index," says JN Gupta, co-founder and MD of SES."On the other hand maximum loss is shown by TCS, in which no governance issue was raised. This confirms that impact of Mr Mistry’s departure or governance issue failed to make any dent in market price behavior of Tata Group shares," he said."SES is of the view that, in case there were concerns on governance issues and prices were impacted due to governance, there must have been a lateral shift in the price pattern. No such pattern has been noticed. It is seen that initially there was impact which got dissipated due to uncertainties disappearing and absorption of news, claims and counter claims," he added.