With 18% stake in Tata Sons, Mistry can play a waiting game against Ratan Tata
With all the controversies engulfing the Tata group these days, we took a look at the shareholding pattern of the Tata Sons and also the major companies under the group. This will help us understand what kind of influence can be wielded by different groups of shareholders in board-level decision-making. Remember, although Cyrus Mistry has been sacked as the chairman of Tata Sons, he remains the chairman of all major operating companies such as Tata Motors, Tata Steel, Tata Chemicals, Tata Beverages, Tata Consultancy Services and Indian Hotels. 
 
Tata Sons is the unlisted holding company of the group. Some 66% of its shares are owned by the various Tata trusts, mostly importantly Sir Dorabji Tata Trust (27.97%) and Sir Ratan Tata Trust (23.56%). The next major chunk of 18% is controlled by Shapoorji Pallonji Group, whose heir apparent is Cyrus Mistry. As much as 12% is held by various Tata companies like Tata Motors, Tata Chemicals and Tata Steel and about 3% is held by individuals. If the trusts are in Ratan Tata’s control, there is little Shapoorji Pallonji group can do except bide their time, until Tata is unable to exercise much influence. Time is certainly on Mistry’s side.
 
 
 
At Tata Motors, the shareholding pattern is dominated by Foreign Institutional Investors (FIIs) who have 45% of the total shares of the company. The promoters hold 33%, Domestic Institutional Investors (DIIs) hold 14% and the public holds just 8%. Here, Ratan Tata is on a sticky wicket. While his lucky strike with Jaguar Land Rover has paid off, FIIs could put pressure on the management to do something about the domestic business which is doing badly. Ratan Tata’s passenger car ambition, showcased with great fanfare less than two decades ago has sputtered. In domestic heavy vehicles, Ashok Leyland has stolen a march over Tatas while Eicher and Volvo are also eating away at its market share.
 
 
The shareholding of Tata Steel is dominated by DIIs (32%), followed by promoters (31%), with the public holding 22% and FIIs holding 15% of the total shares. Mr Mistry had managed to partly undo the problems at Tata Steel. Remember Tata Steel, Ratan Tata’s misadventure, tried to gobble up the much larger Corus Steel exactly at the peak of the steel boom. Mistry managed to get rid of the bleeding Corus. 
 
 
Tata Consultancy Services (TCS) is dominated by promoter holding of 74% of the total shares. The FIIs hold 17%, DIIs hold 4% and the remaining 3% is held by the public. TCS is the cash cow of the group. It seems inevitable that Tata Sons will try to push Mistry out of TCS. Tata Global Beverage Limited, formerly known as Tata Tea Limited, is another company which Ratan Tata had used to make ill-fated international acquisition. In it, Tatas hold 36%, the public holds 30%, DIIs hold 19% and FIIs hold 15%. Tata Chemicals is another large company of the group where 31% of the shares are held by promoters, 28% is held by DIIs, 22% is held by the public and 19% by FIIs. 
 
 
 
 
 
It is surprising to see such large FII holdings in so many poorly-performing Tata companies. Whether the FIIs are lending their name is an open question.
 
In any case, the benefit of doubt in this unseemly war seems to be going to Cyrus Mistry. Hardnosed investors like FIIs see Rata Tata as a terrible allocator of capital. Mistry has positioned himself as undoing Tata’s ego-driven wrong acquisitions. Who will FIIs back? 
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    COMMENTS

    Mahesh S Bhatt

    4 years ago

    Great to see Big Boss on paper on wrong side & SMALL Boss questioning Cheers Now Real Management begins Let there be Deepawali Lights & Enlightens Mahesh

    Ravindra Shetye

    4 years ago

    At present it appears that the Tata sons board was rather tactless and naive, in spite of all the so called luminaries as the board members. Apparently they are or at least look like Ratan Tata's chamchas. For that matter Ratan Tata is also a name sake Tata and not the lineage of JRD.

    Suketu Shah

    4 years ago

    Can fully frust Cyrus Mistry in this battle.Rotten cannot be trusted one but in this battle or otherwise.

    DINESH KOTECHA

    4 years ago

    RT and CM are both glorified personalities. Both are inheritors of family business and resources. Both have not sweated it out with their individual hard work and initial difficulties in business/es. In such a case, they both don't have major achievements of their own. They have been supported with group/family finances, senior and experienced executives in their respective groups have hand holded them in their performed duties. The law of retiring at age 75 at Tatas is now suddenly put in the dustbin, again Ratan Tata become the steering driver of the Group. is this not mental corruption of the man himself. Friends power corrupts and and visible complacency with out of place hollow overconfidence is the main reason why TATA group listed companies are out of favour with analyst community. Where are all the check and control system which were talked about to be in place? Company management/Directors/Kmps all should work as trustees of the shareholders/owners. failure to do so and greed for power and power/self-established right of doing whatever they want to do with company/ies funds and resources is the main reason of the company going own the dumps. When JRD was alive, RT independently tried to run and turnaround NELCO. It was an attempt in disaster or more than 10 years in which RT failed miserably.

    REPLY

    Govinda Warrier

    In Reply to DINESH KOTECHA 4 years ago

    Analysts and retail investors are not on the same page. Former, by and large have constituency interests. That explains the refusal of the market's cautious approach to current developments.

    Gurtej Singh

    4 years ago

    Now when it is exposed that Tata Companies are poorly managed, one will think twice before investing his hard earned money in them?

    REPLY

    Govinda Warrier

    In Reply to Gurtej Singh 4 years ago

    Top level inefficiency combined with immature behavior of individuals can harm any organization, in Government, public and private sector. Hopefully, for Tatas this is just a passing phase.

    Govinda Warrier

    In Reply to Gurtej Singh 4 years ago

    Are there any new revelations except the confession by Mistry that he could not leaf the Group rising to the high expectations?

    Chandrahas Dayal

    4 years ago

    What next? Is a very important question. SEBI, Central Government, minority shareholders, Banks will be asking questions on debt burden, impaired assets, corporate governance, alleged fraudulent transactions, bad investments, board processes. Corporate responsibilities, Auditor's responsibilities, Independent Directors' responsibilities, all these will be questioned. Battleground will shift to Bombay High Court, sooner than later.

    REPLY

    Sanjeev B

    In Reply to Chandrahas Dayal 4 years ago

    Moot points, well pointed out. These are the issues that need to be discussed.

    Dinesh Kumar Chauksey

    4 years ago

    I'm a customer of #TataSky and found that during Mistry's tenure It is giving poor service. So who Ever else except Cyrus&Ratan comes on the helm of TataGroup I would welcome. May be he will clean up the mess.

    Dinesh Kumar Chauksey

    4 years ago

    I'm a customer of #TataSky and found that during Mistry's tenure It is giving poor service. So who Ever else except Cyrus&Ratan comes on the helm of TataGroup I would welcome. May be he will clean up the mess.

    Govinda Warrier

    4 years ago

    Good academic analysis. Beyond that, it is a hazardous venture to predict whose side time will take!

    REPLY

    Kumar Swamy

    In Reply to Govinda Warrier 4 years ago

    Yes, it is just an academic exercise. Authors seem to forget what Tata Trusts are all about. They should study it first.

    R Balakrishnan

    4 years ago

    The debt mountain of the group would be huge. And add to that the debt on the books of Tata Sons- A co with no liquidity bar the dividend it gets. And maybe some property income...

    Realty to miss out Diwali bang
    The surge in buyer sentiment, resulting in home sales picking up during the ongoing festive season, bodes well for the real estate sector. But with long-term confidence of buyers still not restored, a sustainable recovery of residential real estate may well take some more time.
     
    The real estate market, reeling under a slowdown, has seen better home sales in this festive season in the run-up to Diwali, compared to the last season. Even the most stressed NCR market, which has a huge inventory overhang, has seen healthy sales. Some developers of NCR have reported 25-50 per cent increase in sales during the Navratras, with affordable and ready-to-move-in homes registering sharp sales.
     
    Ahead of the festive season, there were clear signs of a pick-up in residential real estate sales. According to Liases Foras Real Estate Ratings & Research, the worst-hit NCR market saw year-on-year sales rising 12 per cent to 17.5 million sq ft (msf) in the April-June quarter. During the six month period from April to October (up to Dussehra), home sales in India's nine top cities have registered an increase for the first time over the last three years.
     
    According to a report by real estate consultancy Prop Tiger, July-September purchases of new apartments by its customers increased 15-20 percent as compared to the same period last year.
     
    There have been a lot of positives this festive season. A series of real estate reforms, including the Real Estate Regulatory Act, has boosted the sentiment of home buyers. Of late, unsold stock and delayed project deliveries have put capital rates under immense pressure. For the last several quarters, home prices have either remained under pressure or declined.
     
    As such, the home buyers have been thinking that prices have bottomed out and with all the deals and discounts, this is the suitable time to buy. They also fear that as the residential real estate recovers over the next three or four quarters, prices will go up. This time, a lot of inventory is available in the secondary market with good deals for buyers to pick up, especially in the fast-moving affordable and ready-to-move-in segment. As affordability has been a major factor impacting the sales, a large number of affordable homes on offer, especially in Delhi-NCR, is positively contributing to increased sales.
     
    Realising that safety of investment is weighing heavily on the minds of home buyers and investors, in the wake of large-scale delivery defaults, developers have taken to aggressive marketing this festive season, guaranteeing buyers peace of mind. They have been offering attractive packages comprising 100 per cent money back with penalty in case of non-delivery, no annual maintenance charges for a few years, no registration charges, no EMI till possession, fixed monthly rental till possession and beyond.
     
    For the first time, NCR developer BDI group has come up with 10-year home warranty. In addition to substantial discounts and freebies, some developers, in order to restore the trust of buyers -- rudely shaken by the lack of transparency -- have come up with offers of all-inclusive pricing with no hidden charges. There are others who are showing transparency in disclosures like giving status of approvals and project completion, details of carpet area, amenities on offer and social infrastructure around the project.
     
    There have been significant trends that are visible this festive season. Though online home sales have been taking place for quite some time, for the first time in this festive season, the auction of homes at the all-India level is being done by global property consultancy JLL India in association with Housebolo.com, guaranteeing quicker, easy and transparent sales with efficient pricing.
     
    This time, there are more end-buyers than investors in the market as real estate, as an asset class, is not as lucrative as other asset classes -- particularly as investors in markets like NCR are facing the brunt of delayed projects and falling prices.
     
    Short-term investors have disappeared from the market. Due to high unsold inventories, new launches have been far and few. As luxury real estate has been badly hit, the trend of affordable luxury homes is visible this time to give momentum to sales. Another significant trend witnessed during this festive season is that investors seem to prefer commercial property rather than homes as this has better prospects of appreciation and return.
     
    Notwithstanding the sales boost and the hopes kindled by the festive season, real estate, especially residential, continues to face many challenges. Many end-buyers still don't find property prices affordable and banks failing to pass on rate cuts to consumers is another dampner.
     
    As the Real Estate Regulation Act is still months away from getting operational, buyers are apprehensive about the safety of their investments. Additionally, property buyers are concerned that returns from real estate have dropped significantly vis-a-vis other asset classes.
     
    According to an Assocham report, the unsold inventory pressure and excess supply continues to cast its shadow over residential real estate. It is the highest in the NCR, with 170,000 unsold units -- approximately 30 per cent of units under construction. Liases Foras has put the unsold stock in the NCR at 366.8 msf, followed by Mumbai Metropolitan Region with 266.7 msf. It is estimated that it may take up to three years to clear this inventory.
     
    And considering all this, one has to perhaps wait for next Diwali to light up the home market with a proper bang.
     
    Disclaimer: Information, facts or opinions expressed in this news article are presented as sourced from IANS and do not reflect views of Moneylife and hence Moneylife is not responsible or liable for the same. As a source and news provider, IANS is responsible for accuracy, completeness, suitability and validity of any information in this article.

     

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    Do problems faced by micro-finance companies in Wardha reflect a larger malaise?
    Religare, a brokerage firm which has consistently been negative on the micro-finance institutions (MFIs), even as they have reported excellent profits, accompanied by rising stock prices, has sounded another warning. It points to the troubled micro-finance debt situation in Wardha. Loksatta, a Marathi newspaper, has highlighted that borrowers in these districts have been facing high debt levels. There are reports of defaults faced by many MFIs relating to amounts as low as Rs500 on a Rs20,000 loan. Many loans provided by MFIs have been diverted for personal purposes. Loans given to women have taken away by male members and wasted in alcohol. In addition, there is a huge interest burden, as interest rates as high as 30% per annum are being charged on these loans. Village heads have alleged that many MFIs are providing loans to village women without adequate background checks. Hence, they have requested the government to take action against these borrowers. 
     
    The situation is serious, as these loans are unsecured in nature. Secondly, it is easy for a particular borrower to become a member of another Joint Lending Group (JLG). In effect, the borrower has the ability to take multiple loans to repay the current dues with a MFI. The Non-performing Assets (NPAs) are transferred from one MFI to another due to which the vicious cycle of loans continues. 
     
    What happens when a particular borrower defaults? MFI's have been hiring recovery agents to recover these loans. In order to avoid repaying these loans, female borrowers and their families run away from their homes and go into hiding. Sometimes, certain recovery agents forcefully try to recover these loans and some borrowers end up selling their utensils and other household wares to meet their debt obligations. 
     
    Is this situation limited to Wardha, or does the malaise extend to other areas and affect the entire micro-finance sector? Brokerage firm Religare is of the opinion that this represents a widespread problem for MFIs in general. It will lead to rising Non Performing Assets (NPAs) for the sector and will lead to a rise in credit costs. With respect to credit costs, Religare concludes, “The average credit cost in the low-ticket fragmented unsecured lending business over a cycle (typically 5-7 years) would be 2.5%-3%. In addition, credit costs are skewed to near-zero levels in an upcycle but surge to around 10% in a downturn.”
     
    There has been a buzz around micro-finance institutions in the past two years, with their stocks currently on an upward trend. They have been able to tap unmet demand from the unbanked segments of the population. The malaise in public sector banks (PSBs) has affected their ability to tap this market, while private sector banks are not interested in small ticket size loans. MFIs are spread across the length and breadth of the country with a number of branches. A problem in a small area may not be reflective of the situation prevailing in the sector as a whole. 
     
    Religare is one of the few brokerage firms, which has been negative on the microfinance sector for a long time. In January this year, it came out with a report which said that asset quality and credit growth among MFIs and NBFCs may be affected in the medium term due to Reserve Bank of India's (RBI) direction to share a database of self-help group members with credit information bureaus from July 2016. Earlier, in August 2015 too, it came out with a report stating that there could be a crisis brewing in India based on the past nine microfinance failures.  It raised concerns on the stupendous growth of 50% rise in Assets under Management (AUM) in FY13-15. However, the financial performance of the MFIs has so far defied the gloom and doom scenario painted by Religare.
     
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    COMMENTS

    Kunal Singh

    4 years ago

    The MFIs are leveraging, securitising their receivables and lending more. Ensuring the numbers look attractive to get investors on board. A situation like Andhra will turn heads. The next hot thing looks like P2P lending with the who's who flocking to invest in these platforms.

    Ramesh Mehta

    4 years ago

    In PSU banks also, everything was "OK" till the true extent of bad debts was revealed...
    Same could be true for MFI's.
    Maybe we will discover the real situation in the next 2-3 years.

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