Monday, December 12, 2016

THE TATA MOTORS DEAL: FIRST OF MANY BY TATA SONS?


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.



10 comments:

  1. You are really is a person with a sea of technical and fundamental knowledge.

    ReplyDelete
  2. Fan of your analysis thanks bro....anuj and Nigel always have soft heart for retail investors they won't misguide

    ReplyDelete
  3. tired of stock market since november... better to travel and return in jan...

    ReplyDelete
  4. too much negativity in the air... we get affected by global ques why cant we do our own stuff?
    demonitisation is such a negative vibe.

    ReplyDelete
  5. Thank you everyone for the feedback. Feels good this morning to see so many hits on the blog.

    ReplyDelete
  6. If pallonji mistry forced to sell his 18.5% stake,tn its end of jemsetji tata's brand of values

    ReplyDelete
  7. If pallonji mistry forced to sell his 18.5% stake,tn its end of jemsetji tata's brand of values

    ReplyDelete
    Replies
    1. How do you figure that? The tatas themselves did not sell them the shares, they acquired them from others.

      Delete