Wednesday, February 21, 2018

1 YEAR OF CHANDRA: MIXED BAG



1 YEAR OF CHANDRA: MIXED BAG

There is a temptation to say N Chandra has stabilized the Tata Group after the ugly Cyrus Mistry saga that played out. Let’s analyze that and while the stock market is not the only yardstick to measure the performance, since that’s an important barometer, let’s take a look at what Tata Group has done under 1 year of N Chandra.

Tata Group is a large conglomerate which essentially has 1 giant company in TCS and 3 large companies in Tata Motors, Tata Steel and Titan. Then it has some other decently sized companies like Voltas, Tata Chemicals, Tata Global, Rallis India, Tata Communications and Tata Coffee among others.

Let’s start with what truly is N Chandra’s baby – TCS. The company that accounts for lion’s share of group’s revenues, profitability and market cap. That stock is up 19.7% in last 1 year, which is good enough but then the IT Index itself is up nearly 16% in that period and TCS has been running under a good template for more than a decade.

Now let’s talk about the much fancied Tata Steel. The stock is up 41% in last 1 year and there have been serious attempts to sort the balance sheet of Tata Steel with the merger of European business with ThyssenKrupp. But just to burst the bubble here, that process started before Mr Chandra took over and the rally in Tata Steel stock is essentially a result of a huge steel cycle where many would argue Tata Steel has actually underperformed. For example during same period, JSW Steel is up 65% and the market now values JSW Steel a good 10,000 crores more than Tata Steel.

Then, let’s come to Tata Motors. There is a school of thought that under Chandra, the domestic CV business of Tata Motors has stabilized. Here again, let’s just look at what Ashok Leyland has done compared to Tata Motors. The stock is up 45% while Tata Motors is actually down 19%. Again, it was a case of being at the right place at right time. The domestic CV market is going through an up cycle and in that Tata Motors may have again underperformed. Make no mistake about it, Tata Motors has been a failure for last 1 year, especially the JLR performance. Ask shareholder of Tata Motors if you don’t believe me.

The only 2 stocks which have truly managed to outperform the markets are Tata Global and Titan, both of which have nearly doubled and this is where Chandra deserves a lot of credit though many people would argue that Titan has been a story of Bhaskar Bhat and Tata Global is bearing fruits of good work done by Cyrus Mistry earlier. But to give credit where due, these stocks have done remarkably well.

Let’s give benefit of doubt to Chandra and say that his 1st year has not been a failure and under him, the group has made positive strides. That cannot be denied and you have to give the man his due. But I would refrain from saying that he has been a phenomenal success. Let’s see the next 2 years. The jury is still out.

P.S. – This is entirely my personal opinion and I do understand that I could be wrong and I reserve the right of being wrong. 






1 comment:

  1. Sir,is there a possibility of TataMotor share price to fall below TatamoTat DVR.?

    ReplyDelete