Tata group market cap soars 40% in three years under Chandrasekaran

In the three years under Chandra, the group's overall m-cap has soared 39.6% to Rs 12 trillion

Natarajan Chandrasekaran (pictured), chairman Tata Sons, completes three years in the top job at the holding company on February 21. Going by the market capitalisation (m-cap) of Tata companies, the tenure has been a mixed bag for man who took over the reins of the salt-to-software conglomerate amid a bitter boardroom battle between Cyrus Mistry, the ousted chairman, and Tata Sons.
 
In the three years under Chandra, the group’s overall m-cap has soared 39.6 per cent to Rs 12 trillion. But that is hardly comforting, considering the performance was driven by Tata Consultancy Services (TCS), which, traditionally, has been the group’s cash cow. If anything, the dependence on TCS has only increased since 2017 — Rs 2 out of every Rs 3 generated by the group firms came from the software major.
 
The overall wealth generated by the group firms could have been higher but for companies like Tata Motors, Tata Power, Tata Communications, Tata Tele Maharashtra, which saw sharp erosion in their m-cap.
 
The overall health was primarily dragged by the group’s flagship, Tata Motors, whose m-cap more than halved to Rs 57,002 crore from Rs 1.45 trillion in February 2017. Tata Motors’ UK subsidiary, Jaguar Land Rover Automotive, has been facing strong headwinds from slowing sales in China and uncertainties related to Brexit, among other factors. The company’s commercial and passenger vehicles volumes in the domestic market have also been hit by one of the most prolonged slowdowns in the economy. Disruptions due to changes in emission and safety regulations and an increase in the cost of ownership due to regulatory changes, too, dented sales.
 
Tata Power is yet another company that has stymied the group’s performance due to high debt burden. Its m-cap in the past three years crimped 39.2 per cent to Rs 13,970 crore. According to recent media reports, the company is looking to raise Rs 6,000 crore from sale of assets in India and abroad to strengthen its balance sheet.

Amid the gloom, some of the consumer facing firms of the group such as Titan, Tata Global Beverages (TGBL), Voltas, Indian Hotels, Trent, and Tata Chemicals gave handsome returns to shareholders.
While Titan’s m-cap zoomed 205 per cent to Rs 1.17 trillion, Trent and TGBL saw a jump of 225 per cent and 168.9 per cent, respectively. 
 
But TCS, whose m-cap saw an increase of 63.8 per cent, dwarfs the good performance of all these companies in terms of wealth generation. Hence, reducing dependence on TCS remains one of the key challenges for Chandra, said analysts.
 
“The Tata group is just trudging along as it was in the pre-Chandra days, supported by TCS,” said Mahantesh Sabarad, head of retail research at SBICAP Securities. “One hasn’t seen any material changes under Chandra. Be it financial re-engineering, the group entering the new businesses, cutting excess flab or consolidation, the pace has been slow,” he said.
 
But many don’t agree with Sabarad. “There has been a sharp focus on financial performance of companies under Chandra. One can’t not take into consideration the overall economic scenario and the group’s exposure to China — one of the group’s key markets, which was battling an economic slowdown before the coronavirus outbreak. Overall, people are happy with his performance,” said a Tata group observer.