Does Tata-Mistry ruling change outlook for Tata Group cos? What experts say

Tata Group companies, on Friday, rallied up to 6 per cent in intra-day trade on the BSE post the Supreme Court ruling

Tata group stocks reacted positively to the Supreme Court’s ruling in favour of Tata Sons on Friday, in its legal battle against the Mistry group.
 
Tata group companies closed with gains of up to 6.1 per cent on the BSE. Among individual stocks, Tata Steel (up 6.1 per cent), Indian Hotels (5.1 per cent), Tata Power (4.9 per cent) and Tata Steel BSL (4.8 per cent) were among the top gainers.
 
Tata Communications, Tata Coffee, Titan, Tata Motors DVR, Nelco, and Tinplate were up in the range of 3.6 per cent-4.1 per cent. In comparison, the S&P BSE Sensex was up 1.17 per cent to close at 49,008.5 points. Only a handful, such as Rallis India, Tata Teleservices Maharashtra, and Tayo Rolls, were down.
 
In contrast, Shapoorji Pallonji group’s three listed companies, although far smaller in market value, saw their share prices fall between 1.8 per cent and 8.5 per cent over the previous close. Sterling and Wilson Solar was the biggest loser, down 8.54 per cent to Rs 249.15.
 
The share price of Tata group’s most valuable firm, Tata Consultancy Services (TCS), remained unchanged. Group companies (excluding TCS) added Rs 20,378 crore to combined market cap of Rs 5.70 trillion a day earlier, an increase of 3.6 per cent. Including TCS, the combined market cap rose from Rs 17.06 trillion to Rs 17.26 trillion.
 
Though most analysts said the SC’s ruling would bring the curtains down on a fiercely fought battle between India’s two big corporate houses, it wouldn’t change things for Tata group companies at the operational and fundamental levels.
 
“This was a pure power tussle between the two parties and wouldn’t change anything drastically for Tata group companies fundamentally. That said, investors can look at TCS among the lot as it is a defensive play in uncertain times,” said G Chokkalingam, founder and chief investment officer, Equinomics Research.

 
“The judgment is sentimentally positive, which got adequately reflected in how the related stocks reacted once the outcome was known. That said, it is always better to resolve issues outside the court. We have been positive on Tata group stocks and continue to remain so,” said Gaurang Shah, senior vice-president, Geojit Financial Services.
 
Over the past year, even as the pandemic took a toll on India Inc and companies around the world, most Tata group stocks have done well at the bourses.
 
Except for Benares Hotels, all Tata-owned stocks have given positive returns since the indices hit their recent low in March 2020. Tata Teleservices, a loss-making company with market cap of Rs 2,512 crore currently, has been the biggest gainer since, rallying 573 per cent to Rs 12.85 until the close of trade on Friday.
 
Tata Communications, Tata Motors, Tata Elxsi, Tata Motors DVR, Tata Steel Long Products, and Tata Chemicals have moved up between 233 per cent and 370 per cent since. Together, they added Rs 7.87 trillion to the group’s market cap in one year.
 
Ambareesh Baliga, independent market analyst, too, believes the ruling will be a status quo as regards the fundamentals of Tata group stocks. “The SC decision removes the overhang on Tata group stocks, but does not change anything fundamentally for them. At current levels, most stocks from the Tata stable are fairly valued — be it Tata Steel, Tata Power, Tata Chemicals or Tata Motors. However, among the lot, I am positive on Tata Elxsi and TCS, which is a defensive bet,” he said.