One advertisement campaign that every Indian will always remember is –'Isko Laga Dala Toh Life Jinga La' run successfully by Tata Sky--Direct-to-Home (DTH) digital satellite television service provider. Tata Sky was one of the pioneering companies that popularised DTH services in India. And 'Jinga La La'- a word which in itself has no meaning, helped a lot to simplify the benefits humourously.
Big stars of Bollywood—Mr Amitabh Bachchan and Mr Aamir Khan who worked in this brand's commercials, made its appeal more favourable. In one of the commercials, Mr Bachchan explained how Tata Sky can offer you a wide variety of channels that would go well with the taste of people of any age group, while in the other Mr Khan made a reference to the winning combination of Tatas and '21st Century'. Of these two, one symbolises technological supremacy, while the other is used synonymously for 'trust' in India.
Tatas are known for making partnerships and entering joint ventures with people and companies that share their passion for excellence and integrity. This why the tryst of Tatas and Mistrys was a hot topic about four years ago when Mr Ratan Naval Tata handed over the charge of Tata Sons to a non-Tata person—Mr Cyrus Pallonji Mistry.
The committee appointed for finding the successor of Mr Ratan Tata had handpicked him. Mr Cyrus Mistry comes from the Shapoorji Pallonji group that holds 18.4% stake in Tata Sons— a holding company that owns controlling stake in all Tata group companies. An introvert by nature, Mr Cyrus Mistry, took a while to make his mark but he chartered his way with a high resolute and aplomb.
When everything started looking 'Jinga La La', the news of Triple Talaq rocked the world. Mr Cyrus Mistry was asked to establish a 'direct-to-home' connection. He was ousted from the top-most position with immediate effect. Although as a temporary arrangement, Mr Ratan Tata made a comeback.
Nowadays, people use two remote controls—one to switch a TV on-off and the other to surf channels, thanks to digitalisation. However, nobody anticipated that the Tata group of companies were being operated by two remote controls. The ease with which one of the most powerful business groups of India could expel Mr Mistry gives you a sense of the existence of two parallel power houses.
Are there any governance issues at Tata companies?
The official statement suggests that Mr Mistry was removed for the reason of bad performance. However, a fair assessment suggests that one can't blame Mr Mistry alone, considering the problems he inherited from the previous Chairman.
When he took over as the Chairman, the group was facing issuing about the bad allocation of funds. Nonetheless, the Shapoorji Pallonji group can't absolve itself from the responsibility of decisions that were taken when Mr Ratan Tata was the Chairman, which subsequently proved to be wrong. Weren't they one of the major shareholders when Tata Steel clinched the Corus deal? Accusing Mr Mistry for streamlining operations is equally questionable too.
To make matters worse, Tatas and Mistrys took potshots at one another after the forced exit of Mr Cyrus Mistry. There was a rumour on the market grapevine that Mr Cyrus Mistry might drag the Tatas to the court over his dismissal. Nothing significant has materialised as yet.
The Tatas are keeping tightlipped about the succession plans of Mr Ratan Tata. Rather than resolving questions that bog down many Tata group companies at present, the expulsion of Mr Mistry gives rise to more questions. Tata Sons is an unlisted holding company which is answerable only to a handful of shareholders, however, as it controls the entire empire of Tata group, investors are all ears as to who will take on the Chairman title of Tata Sons.
Impact on investors…
You as an investor may not have invested in any Tata group company, but if you are a mutual fund investor, your equity oriented schemes are likely to have at least some exposure to Tata group companies. Let's see who are and have been betting big on Tatas
Top 15 investors from the non-promoter group
Public shareholding with
over 1 % stake |
Market value
(Rs crore)# |
| Life Insurance Corp |
35,569.34 |
| Citibank Na,New York-Adr Dept |
28,639.09 |
| ICICI Prudential Life Insurance |
3,317.45 |
| Rakesh Radheshyam Jhunjhunwala |
2,583.38 |
| HDFC Mutual Fund |
2,781.56 |
| Govt of Singapore |
2,486.68 |
| Matthews Pacific Tiger Fund |
2,233.05 |
| Abu Dhabi Investment Authority |
2,088.07 |
| Franklin Templeton Investment Funds |
1,868.19 |
| Reliance Mutual Fund |
1,835.59 |
| New India Assurance |
1,337.25 |
| Govt Pension Fund Global |
1,135.05 |
| ICICI Prudential Mutual Fund |
979.40 |
| General Insurance Corp of India |
947.93 |
| SBI Mutual Fund |
779.50 |
# Market value as on October 28, 2016
(Source: Business Standard)
The above given table highlights the exposure of investors who are over 1% of the total market capitalisation of Tata companies. However, that doesn't tell you how much is the total exposure of a particular investor? For example, as per above given table, if you only consider investments of HDFC Mutual Fund which constitute 1% plus exposure to any Tata group company, the market value of such investment stands at Rs Rs 2,781.56 crore as on October 26, 2016. However, the total exposure of the fund house is to Tata companies was Rs 4,522 crore as on October 28, 2016. This implies that mutual fund houses are picking up companies as per the merits of underlying businesses. They are allocating more money to the companies they are more confident about.
Mutual fund houses with significant exposure to Tata Companies
# Market value as on October 28, 2016
(Source: Business Standard)
All mutual funds put together have over Rs 22,000 crore worth investments across 29 listed Tata group companies. By and large, all mutual fund houses are bullish on a select list of stocks from the Tata pack. For example, 316 schemes hold Tata Motors in their portfolio and about 241 schemes hold TCS, as per the portfolios disclosed on September 30, 2016.
Whereas, Only 9 schemes hold Tata coffee and just 2 schemes have faith in the prospects of Tata Investment Corporation. It's noteworthy that, no fund house has investments in some companies such as Tinplate and Co., NELCO and Tata Metaliks. (Source: Zee Business)
This holding pattern speaks volumes. Some Tata group companies are doing miracles for the group while others are dragging their feet. One of the allegations Mr Mistry has been facing is this—he concentrated only on select companies that were in good shape, ignoring others.
What mutual funds have to say about the issue?
Mutual fund houses are not discussing the matter openly, however, on the condition of anonymity, many of them are expressing their confidence in the integrity of the Tata group. The general tone is that Mr Mistry's exit has not impacted the routine business of individual companies. Moreover, there is no panic at a company level management. Mutual fund houses believe the ongoing feud between Tatas and Mistrys is pretty common for any group of this size. In short, mutual funds haven't pressed the panic button and have continued to maintain their views on Tata group companies.
What the future looks like?
This might be just a coincidence but Mr S. Ramadorai, the former vice-chairman of TCS who played a significant role in making TCS a global giant, has resigned from his current role as a chairman of National Skill Development Agency (NSDA). He was also heading the National Skill Development Corporation. (NSDC).
This is a significant development considering his resignation from the post is equal in rank to a cabinet minister. Skill Development has been the flagship programme of the Modi Government, and Mr Ramadorai was considered a key man in making the scheme successful. He is regarded as one of the confidants of Mr Ratan Tata.
Mutual Fund houses and their fund managers are keeping a close track of all these developments. However, as they already have clarified, they wouldn't question the integrity of the group and turn away from their usual process of picking stocks for their portfolios.
On this backdrop, you shouldn't reshuffle your portfolio even though some of the schemes in your portfolio may have a higher exposure to Tata group companies. To avoid being in an undesired position later, you should take utmost care while selecting a mutual fund scheme.The ones that come from the stable of fund houses following sound investment and risk management processes stand a better chance to generate adequate returns for you. You should also pay attention to the track record of schemes under various market phases and analyse their performance across time periods.
If you are confused about which schemes you should invest in, you may like to take advantage of the unbiased mutual fund research services offered by PersonalFN—make your life 'Jinga La La'…
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