Meets investors including JP Morgan, CLSA, Deutsche, Credit Suisse to soothe frayed nerves as group stocks plunge in early trade; recover after group refutes Mistry allegations
Thursday began with a bloodbath for most Tata group stocks which, taken together lost about 55,000 crore in market valuation till early morning trades from the time Cyrus Mistry was ousted as group chairman and a bitter war of words followed.
As the market opened, shares of Indian Hotels Co Ltd slumped 12% while Tata Motors dropped 3.5% and Tata Steel declined 4.5%. These are the companies against which Cyrus has cautioned about the risk of impairment of values.
But a release of a statement from Tata Sons countering Mistry’s allegations, a meeting between institutional investors and the Tatas and also clarifications issued to exchanges by the companies named in the allegation helped soothe investors’ nerves and the stocks recovered significantly from day’s low.
Indian Hotels recover lost grounds with a final loss of 5.81% after IHCL and Tata Sons termed as ''completely baseless and unfounded'' speculations that Rakesh Sarna, the managing director and CEO of Taj Hotels, is leaving the company.
Sarna was appointed to lead IHCL on September 1, 2014, taking over from the Tata group hospitality firm''s long-serving chief Raymond Bickson.
Tata Steel ended with a loss of just 0.44% while Tata Motors was down 1.44%.
Tata Teleservices was hammered the most plunging 9.72% by the end of the day while TCS was the lone bright spot appreciating by 0.68%
At the end of the trading day, the loss in market cap was down to Rs 26,000 crore.
In a bid to assuage growing uneasiness of investors, Tata Steel management met major institutional investors, foreign and local including and one on one with Life Insurance Corp in Mumbai which helped recover of sentiment towards the companies by the end of the trading day on Thursday.
FIIs like JP Morgan, CLSA, Deutsche, Credit Suisse, Citi, HSBC, Morgan Stanley, UBS; domestic entities like Kotak, Motilal Oswal, ICICI Securities, HDFc, Birla Sunlife and Reliance Capital were there in a meet with the management of Tata Steel.
The sell-off of Tata group-owned stocks is expected to continue for sometimes till there emerges more clarity about the successor of Cyrus Mistry, said an analyst with Motilal Oswal.
“The sale of such stocks be it TCS or Tata Motors have largely been triggered by Foreign Institutional Investors for whom the image of the house of Tatas has suffered a severe beating. We don’t see any major reversal till the FIIs are assured about new leadership. In the meantime, there could be opportunities for domestic investors to lap up fundamentally strong scrips like TCS,” the analyst said on condition of anonymity considering the sensitivity of the case.
The theatrics of allegations and counter-allegations between the Tatas and Cyrus Mistry got reflected on the market on Thursday with most of the Tata stocks coming under very selling during the early hours of trade reacting to news of the former chairman of Tata Group flagging the risk of more than a lakh of crores of impairment of value across several Tata group companies.
While subsequent rejoinder by Tata Sons and by some of the individual listed entities reacting to queries raised by exchange authorities helped soothe the nerves of investors of Tata group stocks, short covering on the expiry day and some greenshoots today in earnings coupled with positive news about UK economy lifted the market from the day’s low.
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