An ongoing internal power struggle and regulatory challenges at Tata Sons have triggered a significant downturn for the broader Tata Group, wiping out approximately ₹2.7 lakh crore (USD $32.5 billion) from the market value of its listed entities. Over a period spanning from August 13 to early October, 26 Tata Group stocks collectively lost 10% of their market capitalization, falling from ₹27,02,915 crore to ₹24,37,166 crore.
Leading the Market Decline
The market slump saw 23 out of 26 Tata shares deliver negative returns, with a dozen experiencing double-digit percentage drops. Tata Elxsi Ltd, Tata Motors Passenger Vehicles Ltd (TMPV), and Voltas Ltd were among the hardest hit, each plunging 17%. Tata Technologies Ltd also saw a significant decline of 15.86%, while TRF Ltd fell 13.95%.
Other notable companies experiencing substantial losses included Automotive Stampings and Assemblies Ltd, the flagship Tata Consultancy Services Ltd (TCS), and Trent Ltd, which saw declines between 12% and 14%. Tata Teleservices (Maharashtra) Ltd, Titan Company Ltd, Tata Consumer Products Ltd, Tata Capital Ltd, and Automobile Corporation of Goa Ltd each dropped 10-11%.
The Root of the Tussle
The market volatility stems from a series of events surrounding Tata Sons, the group's holding company. Key factors contributing to investor uncertainty include:
- N Chandrasekaran's initial decision in August not to seek reappointment as Tata Sons Chairman.
- The Reserve Bank of India (RBI) rejecting Tata Sons' request to surrender its registration as an upper-layer non-banking financial company (UL-NBFC).
- Chandrasekaran's subsequent reappointment by the Tata Sons board.
- An objection to this reappointment raised by the Noel Tata-led Tata Trusts, which holds a 66% stake in Tata Sons Private Limited (TSPL).
- Consideration by the Tata Sons board to go public, followed by a proposal to merge Tata Sons with two unlisted units, a move potentially aimed at avoiding a direct listing.
Stakeholder Perspectives and Concerns
Tata Trusts, as the majority shareholder, has communicated to the TSPL Board its belief that the proposed reorganisation and compliance plan would serve the best interests of the entire Tata Group and its stakeholders. They have urged the board to approve the proposal and seek a 'no-objection certificate' from the RBI for the planned merger and reorganisation of TSPL.
Several listed Tata Group companies also hold stakes in Tata Sons. These include Tata Chemicals (2.53%), Tata Steel (3.06%), Tata Motors Passenger Vehicles Ltd (3.06%), Tata Power Company Ltd (1.65%), Indian Hotels (1.11%), TCPL (0.43%), and Tata Investment Corp Ltd (0.08%), collectively holding 11.94%.
S&P Global Ratings has commented that a potential listing of Tata Sons and a leadership transition could influence the assessment of group support, particularly if public shareholders increase scrutiny of capital allocation. However, S&P currently maintains that these developments would have no immediate impact on the ratings of core group entities like Tata Steel, Tata Motors, Tata Power, and Tata Capital, which are rated BBB/Stable.