Equity investors shrug off NCLAT's adverse judgment in Tata-Mistry case

Most key Tata stocks have gained since Wednesday's order; weakness remains in smaller stocks

Equity investors have largely shrugged off the National Company Law Appellate Tribunal’s (NCLAT’s) adverse judgment in the Tata Sons-Cyrus Mistry case. Most of the leading Tata stocks have either gained in the past three days or have fallen marginally. There has been no major meltdown or correction in the stock prices of Tata companies, despite the judgment having the potential to create uncertainty in the top leadership. 

The NCLAT had on Wednesday restored Cyrus Mistry as Tata Sons chairman, setting aside the appointment of N Chandrasekaran to that position. The group is likely to appeal against the NCLAT order in the Supreme Court in the coming weeks. 

Analysts say that even if the apex court grants a stay on the order, it will curtail Chandrasekaran’s ability to take major decisions, including those related to top-level appointments. This could hamper decision making in key group companies whose boards of directors are chaired by the Tata Sons chairman, they said.

“In the short term, it will certainly bring uncertainty into the group as the NCLAT order has called the appointment of the current Tata Sons chairman as illegal. And if the case drags on in the Supreme Court, then it will make life difficult for the Tata group companies. An early decision by the top court is good for all stake-holders,” said Shriram Subramanian, founder and managing director of proxy advisory firm InGovern. 

The bourses are, however, not giving much importance to the issue. 

The group’s top two most valuable companies — Tata Consultancy Services (TCS) and Titan Company — have gained since Wednesday in line with the general buoyancy in the large cap stocks. The benchmark BSE Sensex is up 0.8 per cent since the close trading on Tuesday. The two companies account for nearly 80 per cent of the group companies’ combined market capitalisation.

The NCLAT judgement came during the market hours on Wednesday.

Others say Mistry has a stake in the group companies’ financial performance through his family stake in Tata Sons. They say it precludes a lengthy legal tussle that may adversely affect the group's functioning for long-period.

“Unlike other Tata group management, Mistry has skin in the game as he owns a 18.5 per cent stake in Tata Sons and indirect holding in TCS worth $13 billion. Any share price movement impacts them the most, unlike other top management. We always believe that companies should be run by those who have skin in the game,” said Anil Singhvi, founder director of proxy advisory firm Stakeholders Empowerment Services (SES).

There has been some weakness in the smaller Tata stocks but it tough to link it to the NCLAT judgment. Indian Hotels saw the maximum sell-off and the stock is down 6 per cent in the past three days. Analysts say it could be because of the impact of the anti-Citizenship Amendment Act protests. Many European and North American countries have issued travel advisory against India in view of the protests.