Tata Group stocks tumble on sudden Cyrus Mistry exit

Shares across Tata Group companies tumbled on Tuesday morning following the surprise decision of Tata Sons, the holding company of Tata Group, to remove chairman Cyrus Mistry and bring back Ratan Tata as the interim chairman.

Tata Sons has said a selection panel has been formed and mandated with the task of finding a new chairman in four months.

Among the major Tata Companies, Tata Motors declined 1.2%, Tata Steel was down 2.5%, Tata Communications fell 2.4%, Tata Power was down 1.9% and Tata Consultancy Services fell 0.7%.

Analysts say the surprise move may lead to near-term uncertainties, but it was not a crisis situation at Tata Group and wouldn’t change the fundamentals of companies.

“The sudden removal of Mistry took the market by surprise and in the near-term we could see some volatility in Tata Group stocks. It raises questions on the governance front too. However, all the companies are independently managed and so their operations won’t get impacted,” said Vinod Nair, head of research at Geojit BNP Paribas Financial Services.

While work in progress at most firms would continue, some long-term strategies undertaken at group companies may now be put on hold, he said.

For instance, Tata Motors had planned two new launches per year to turnaround the domestic passenger car business. The launches so far, including Tata Zest, Bolt and Tiago have had mixed success. At Tata Steel, the European operations still remain an overhang and the dispute between Tata and Docomo over the telecom venture has gone into arbitration.

No specific reason was provided by Tata Sons to remove Mistry. Interestingly, shares of many Tata Group companies have rallied sharply since December 28, 2012, the day Mistry took charge.

Tata Consultancy Services and Tata Motors have gained 92% and 81% respectively since Mistry took charge on December 28, 2012. Tata Communications has surged 183%.However, Tata Power declined 23%, Tata Global Beverages fell 4% and Tata Steel was also down 0.50% over the same period.

The combined market valuation of all listed companies of Tata Group almost doubled during the four-year tenure of Mistry. The market capitalisation of the listed companies of Tata Group stands at around $125 billion now or about Rs 8.5 lakh crore, up from Rs 4.6 lakh crore in December 2012.