Tata-Mistry battle: Analysts peg Mistry stake at nearly Rs 1.16 trillion

Tata Sons' market value pegged at Rs 6.32 trn based on the holding company discount for its listed peers at present

Tata Sons is expected to be valued at Rs 6.32 trillion, based on the prevailing holding company discount in the listed space.
 
The country’s top listed holding and investment companies such as Bajaj Holdings & Investments, JSW Holdings, Grasim Industries, Bajaj Finserv, Bombay Burmah, Mahindra & Mahindra, EID Parry, Vedanta, Tata Investment, and Pilani Investment are currently trading at around 37 per cent discount to their current net asset value.
 
Tata Sons’ stake in listed companies such as Tata Consultancy Services, Titan, Tata Motors and Tata Steel, among others, is currently valued around Rs 10 trillion. Besides, the group holding and the promoter company also has invested nearly Rs 37,000 crore in unlisted Tata ventures in retail, aviation, defence, and real estate, among others.
 
Based on this, the Mistry family’s 18.4 per cent stake in Tata Sons would be valued at nearly Rs 1.16 trillion, or around $16 billion at the current exchange rate. 
 
A holding company net asset value (NAV) is the sum of the current market value of their listed investments, unlisted investments, cash and bank balance on the books, minus the debt or financial liabilities on their books at the end of this month.
 
The calculation doesn’t take into account the embedded brand value of Tata. Tata Sons charges a small royalty or fee from the various group companies for the right of using the Tata brand name.

 
Analysts say the actual value of the Mistrys’ stake could be higher than the financial or market value of the stake if the brand value is taken into consideration. Last September, the Shapoorji Pallonji group agreed to sell its stake in Tata Sons for around Rs 1.78 trillion based on its stake in group listed companies as well as unlisted companies.
 
It had assigned brand value of Rs 1.46 trillion to Tata Sons. Tata group market capitalisation has risen by 31 per cent since then.
 
The 18 listed holding companies in the Business Standard sample had combined market capitalisation of Rs 4.91 trillion on Friday against their net asset value of Rs 7.7 trillion. Holding companies are valued at a discount to their NAV as investors don’t have direct access to the cash flows and dividend paid out by companies in its portfolio.
 
For example, Bajaj Holdings & Investments, a pure play holding company with no standalone business operations, has a market capitalisation of around Rs 36,300 crore against its NAV of Rs 1.18 trillion, implying a holding company discount of around 69 per cent.  The company is the promoter of Bajaj Auto, Bajaj Finserv, and Maharashtra Scooters.

 
Similarly, JSW Holdings is currently trading at 64 per cent discount to its NAV, while Grasim Industries is trading at 47 per cent discount to its NAV.
 
Analysts say holding company discount would be much lower in case of Tata Sons, given its bigger size and large dividend income from TCS — the country’s top dividend payer.
 
The company earned total equity dividend of around Rs 24,000 crore from various group companies in FY20 – more than any other holding company.
 
TCS, however, accounts for nearly 90 per cent of the dividend income and the market value of its listed portfolio.
 
Tata Sons has direct equity stake in 17 listed group companies with a book value of around Rs 54,000 crore.
 
It also has large equity investment in unlisted group companies such as Infinity Retail, AirAsia, Tata Capital, Tata Teleservices, Tata Advance Systems, Tata Autocomp, Tata Housing, Tata AIG General Insurance Company, Tata Realty and Infrastructure, and Tata SIA Airlines among others.