Mumbai: Tata group companies lost a combined Rs27,506.34 crore in market value over the past three days after the ouster of Tata Sons chairman Cyrus Mistry and his subsequent warning that the group may have to write down about two-thirds of its net worth due to five unprofitable businesses.
On Thursday, all group stocks, excluding cash cow Tata Consultancy Services Ltd (TCS), closed in the red after the contents of Mistry’s email to the board of Tata Sons became public.
Tata Motors Ltd fell 1.4%, Tata Steel Ltd declined 0.44% and Tata Communications Ltd slipped 1.7%. However, TCS closed 0.7% higher. Indian Hotels Co. Ltd saw the steepest fall of 5.8%, while Tata Power Co. Ltd was down 1.4% and Tata Global Beverages Ltd fell 5.1%.
“We see further pressure in stock prices of the group owing to recent developments of write off possibility suggested by Mr Mistry, especially since the exchanges have taken up this matter with the group," said Amit Singh, vice-president, institutional equities, at Choice Broking.
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BSE and NSE on Wednesday sought clarification from various listed Tata group firms about the purported disclosure by Mistry about a possible Rs1.18 trillion writedown at these firms. The exchanges have asked the firms, including Tata Motors, Tata Steel, Indian Hotels, Tata Teleservices and Tata Power, to provide full details about these issues.
“We feel this uncertainty can continue for couple of weeks to months depending on how well the new chairman and the board take matters in control. The letter war in public domain is hurting the Tata brand further," said Singh.
The Securities and Exchange Board of India is also keeping a close watch and will look into any possible breach of corporate governance norms and listing regulations at the listed companies, PTI reported late on Wednesday.
In his email, Mistry said he had inherited a debt-laden enterprise saddled with losses and singled out Indian Hotels, Tata Motors’s passenger-vehicle operations, Tata Steel’s European business, part of the group’s power unit and its telecom subsidiary as “legacy hotspots". Despite ploughing Rs1.96 trillion—more than the group’s net worth—into those units, they still face challenges and realistically assessing their fair value could result in writing down about Rs1.18 trillion over time, he wrote.
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On the Tata Nano, he said the small car’s development costs were always above the threshold in the product concept, resulting in mounting losses. Referring to the AirAsia joint venture, Mistry said “ethical concerns have been raised with respect to certain transactions as well as the overall prevailing culture within the organization".
Mistry also blamed Ratan Tata for questionable decisions taken in the case of Tata Power’s aggressive bidding for the Mundra project, Indian Hotels’s Sea Rock purchase and the shareholder agreement struck with Japan’s NTT DoCoMo.
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