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The twist in the Tata Sons' tussle

For a mid to long-term view, we expect Tata Group’s stocks to see a rise and align themselves with the overall positive outlook for the index, says Gaurav Garg.

December 21, 2019 / 04:41 PM IST
 
 
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Gaurav Garg

The Bombay House plunged into uncertainty after the National Company Law Appellate Tribunal reinstated Cyrus Mistry as the chairman of Tata Sons. The decision came a year after Mistry challenged in NCLAT a National Company Law Tribunal’s order.

NCLAT has termed Mistry’s removal and N Chandrasekaran’s appointment as the Chairman of Tata Sons in February 2017 - illegal. The reinstatement is supposed to happen within four weeks of the decision. The new year could thus bring in a new chairman.

This year had not been so good for the $110-billion group either. Tata Motors and Tata Steel witnessed a decline following a lack of positive cues on the global as well as the domestic front, though TCS and Tata Global Beverages seemed to be on a much stable path.

A change in the management will mean a change in the manner of operating; making things more complicated. These complexities will most likely mean a slowdown in taking decisions and an increase in the gap between board members in the initial stages of implementation. The result of this boardroom battle will increase pressure on the stock prices.

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What one also has to keep in mind is that if Tata Sons decide to move to the Supreme Court, the matter and the seat will be tied up for the next three years at least. This will create a blanket of stress for the stocks, with global operations and prices taking a hit in the days to follow.

However, the precariousness associated should not hold them back from making a positive run in the long term. For a mid to long-term view, we expect that Tata Group’s stocks will see a rise and align themselves with the overall positive outlook for the index.

The reason for this is rooted in the thought that in the long run, the shareholders will appreciate the improvements in transparency, which in turn will reconfirm the values that the Tata Group has always stood for. 

A positive outlook is expected as the investors will likely shift their focus to the fundamentals rather than simply attaching sentiment to the NCLAT’s decision.

(The author is Head of Research at CapitalVia Global Research Limited- Investment Advisor.)

Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Moneycontrol Contributor
first published: Dec 21, 2019 08:04 am

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