You have all read the news – some unidentified buyer is
willing to buy 1.73% stake in Tata Motors at up to 10% premium. Sounds wow
right? May be that’s the intention. What I explain here is my gut feeling and I
could be completely wrong, so take this with a truckload of salt. Let’s understand
few things first. My sense is this unknown buyer is Tata Sons and now let’s get
to the deal.
This 10% premium sounds huge but is actually not much in
terms of meaning because a) This is screen based, so it’s a maximum of 10% and
b) the stock is already down 25% from its highs of 600, so it’s not as if this
is some outlandish price for Tata Motors. So what exactly am I trying to say
here?
While Tata Group is a huge conglomerate, there are only
2-3 really big stocks and TCS and Tata Motors clearly belong to the top. My
sense is that this is 1 step towards the final Tata-Mistry truce where the only
logical solution I see is Mistry selling the 18.4% stake in Tata Sons. Now it’s
in interest of both parties that this 18.4% gets a reasonable value.
So, this exercise in essence is to make sure the sum of
the part valuations of Tata Sons are brought to respectable levels. Curiously,
note how TCS was surging today while the rest of the IT pack was down and TCS is
the company where Tata Sons of course has highest stake. Keep watching this space, it could be first of
a few more deals to come in this space.
P.S. These are my first thoughts and my personal views. I
have not contacted Tata Sons for a response and please ignore the typos and
grammatical mistakes.
