Billionaire Mistry’s Wealth Swells on TCS Rally: Corporate India

Indian-origin billionaire Pallonji Shapoorji Mistry added $2.8 billion to his wealth last year, helped by a 73 percent surge in Tata Consultancy Services Ltd. that was the best performance in the S&P BSE Sensex index.

An 11 percent drop in the rupee against the dollar and optimism about a global economic recovery fueled the gains in Asia’s biggest software exporter, which is 74 percent owned by Tata Sons Ltd. As the largest individual shareholder in Tata Sons along with his family, Mistry, 84, has amassed a $14.1 billion fortune, according to the Bloomberg Billionaires Index.

Mistry’s net worth bucked the drop in the assets of Mukesh Ambani, the nation’s richest man, and Lakshmi N Mittal, the chairman of ArcelorMittal. While the weakest economic growth in a decade in India and a global steel glut shrank the wealth of Ambani and Mittal, Mistry’s fortunes are seen continuing to swell as Tata Consultancy’s earnings growth outpaces that of competitors Infosys Ltd. and Wipro Ltd.

“Even within the Indian IT sector that is outperforming, the performance of TCS has been flawless,” Harit Shah, an analyst with Nirmal Bang Institutional Equities in Mumbai, said in a phone interview. “European clients are becoming more open to outsourcing, that is a very flattering sign. U.S., the other important geography, is picking up too.”

Tata Consultancy posted a 34 percent jump in net income in the three months ended September, compared with nearest Indian rival Infosys’s 1.6 percent profit increase and Wipro’s 20 percent growth over the same period.

Profit Projection

Net income is projected to climb 45 percent to 51.4 billion rupees ($826 million) at the Mumbai-based company in the fiscal third-quarter, according to the median of six analysts’ estimates compiled by Bloomberg. That would outpace analysts’ median estimates for profit growth of 12 percent at Infosys and 18 percent at Wipro.

Accenture Plc, the second-largest technology-consulting company, last month reported profit that topped estimates as demand for its expertise resurfaced in the U.S. and Europe. Bookings for consulting rose as customers ramped up investing in projects, with Europe recovering from its debt crisis and the U.S. Congress resolving its budget negotiations.

“The overall demand environment remains robust,” Accenture Chief Financial Officer David Rowland told investors on a conference call. The Dublin-based company is considered a bellwether for the information-technology market because its earnings cycle ends a month sooner than competitors.

Mumbai Landmarks

Mistry, whose son Cyrus P. Mistry controls the coffee-to-cars Tata conglomerate as the group’s chairman, joined his family’s construction business at age 18. The business was started by Mistry’s grandfather with an Englishman in 1865. Then known as Littlewood Pallonji & Co., it constructed Mumbai’s first reservoir near Malabar Hill.

The Shapoorji Pallonji group has since built Mumbai landmarks such as the Reserve Bank of India, the building housing the India headquarters of HSBC Holdings Plc, the new building of the Taj Mahal Palace and the Oberoi Hotel. It also constructed the palace complex for the Sultan of Oman.

Mistry’s father received a 12.5 percent stake in Tata group shares in 1930 for building automobile factories and steel mills for Tata companies. Subsequent purchases from other Tata family members have made the Mistry family Tata Son’s largest individual shareholder with an 18 percent stake.

Jai Mavani, group executive director at Shapoorji Pallonji, declined to comment on the billionaire’s holdings citing company policy.

‘Quiet Group’

“They are a very quiet group which goes about executing its projects and building its businesses rather than seeking publicity,” said U R Bhat, managing director of Dalton Capital Advisors India Pvt. whose U.K.-based parent Dalton Strategic Partnership LLP manages $2 billion of assets globally. “That’s how they are and that’s how it should be.”

In December 2012, Mistry’s younger son Cyrus, picked in 2011 to lead the $100 billion conglomerate, took over from Ratan Tata, who was the group’s chairman for two decades. Elder son Shapoor P. Mistry took charge as the Shapoorji Pallonji group’s chairman in June 2012. Shapoor once received an 110-acre stud farm as a birthday present from his father.

The Shapoorji Pallonji group, spread across Asia, Middle East and Africa, has annual revenue of $2.5 billion and employs 23,000 people in its real estate, textiles, infrastructure and engineering businesses, according to its website.

Real Estate

In November, Shapoorji Pallonji announced an alliance with Toronto-based Canada Pension Plan Investment Board to acquire office buildings in big Indian cities. The pension fund managed C$193 billion ($181 billion), of which almost C$22 billion was invested in real estate, according to the company statement.

“This transaction represents our first real estate venture in India,” Graeme Eadie, head of real estate investments at the fund, said in an e-mail. “Shapoorji Pallonji Real Estate is an experienced operator, developer and general contractor, with an established reputation.”

The closely-held construction group contributed $1.6 billion of Mistry’s wealth, while the Tata Consultancy stake constitutes the biggest chunk -- $9.2 billion -- according to calculations by Bloomberg Billionaires Index.

Tata Consultancy climbed for a second straight year in 2013 swelling its market value on Dec. 31 to 4.25 trillion rupees. Its closest Indian competitors Infosys and Wipro, also beneficiaries of a weaker rupee and rebounding global economies, rose by 50 percent and 59 percent respectively.

‘Key Risk’

Shares of Tata Consultancy are projected to climb 8.3 percent from their Jan. 1 closing price to 2,332.99 rupees, according to the consensus 12-month target price of 58 analysts’ estimates compiled by Bloomberg. The stock rose 0.6 percent to 2,167 rupees at the close in Mumbai trading.

The company’s price-to-estimated earnings ratio of 23 versus 19 for Infosys and 18 for Wipro as of Jan. 1, makes it more expensive, according to Taina Erajuuri, who helps manage more than 2 billion euros ($2.7 billion) of assets at FIM Asset Management Ltd. in Helsinki.

Tata Consultancy’s valuations continue to be at a premium to peers including Infosys and Wipro posing a “key risk to the stock price performance going forward,” Erajuuri said in an e-mail. Also, the December quarter was “a seasonally weak period for revenue growth due to furloughs, leaves and holidays,” she wrote.

‘Crown Jewel’

The software-services exporter signed eight large deals in the fiscal second quarter and the demand pipeline looked strong, Chief Executive Officer N. Chandrasekaran said Oct. 15. A week later, Tata Consultancy said it had won a deal to manage Bombardier Inc.’s data centers in Germany.

“TCS is definitely the crown jewel for the Tata group,” said Bhat. “Given the rather big lead that TCS now enjoys over its peers, unless it makes a dramatic strategic mistake, which appears unlikely, it should enjoy the pride of place among the IT companies in India.”

Goldman Sachs Group Inc. in October said the software provider “is well positioned to record sector leading revenue in an improving demand scenario” and upgraded the company to buy. The stock is recommended for investment by 49 of the 70 brokerages whose ratings Bloomberg compiles.

“Tata Consultancy has been a huge wealth creator for investors,” said Nirmal Bang’s Shah, referring to Mistry’s holdings. “Maximum benefits from this are bound to flow back to the largest shareholder of Tata Sons, which in turn owns the largest chunk in TCS.”

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