Tata Shares Pull Down Sensex From 3-Week High on Chairman Ouster

  • Tata Consultancy, Tata Steel, Tata Global Drop 1% to 3%
  • Market reaction to Tata to be short-lived: Vachana Investments

Tata Turmoil: Chairman Cyrus Mistry Ousted

Tata Steel Ltd. and Tata Consultancy Services Ltd. dragged down Indian benchmark indexes from a three-week high after the nation’s largest conglomerate abruptly ousted its chairman.

The S&P BSE Sensex dropped 0.3 percent at the close in Mumbai, with materials producers and energy companies also contributing to the declines.

Chairman Cyrus Mistry, 48, was replaced by Ratan Tata, a 78-year-old member of the founding family and the previous chairman who will serve as the interim chief and take part in the search for a more permanent successor. Tata asked companies to focus on being leaders in their businesses and not be concerned about the change in management, according to a statement issued on Tuesday.

Tata Group CompaniesChange
Tata Consultancy-1.2%
Tata Motors-1.1%
Tata Steel-2.5%
Tata Global-2.6%

“This has created short-term uncertainty for the Tata Group, and given its size it’s pulling down the index,” Rudramurthy B.V., head of research at Vachana Investments Pvt., said by phone from Bengaluru. “This is a temporary reaction. Investors with a long-term horizon must use the declines as an opportunity to buy” into group companies that are well-run and don’t have a lot of debt, he said. He’s bullish on Tata Global Beverages Ltd., the Indian partner of Starbucks Corp., and its subsidiary Tata Coffee Ltd.

Mistry’s ouster marks the end of the push to transform Tata Group into a more prudent enterprise than the globetrotter that bought Jaguar Land Rover and steelmaker Corus Group Plc under Ratan Tata. In recent years, the Indian conglomerate refinanced loans and sold assets to help tackle debt levels that had bloated to more than $30 billion. Tata Steel in March said that it would consider selling its U.K. operations after years of losses.

The group, founded in 1868, employs more than 660,000 people and has 29 listed units with a combined capitalization of more than $100 billion. Tata Consultancy Services is the group’s biggest unit and India’s largest company by market value.

Foreign investors sold $59 million of local shares on Monday paring this year inflows to $7.4 billion of domestic shares this year, the most in Asia after Taiwan and South Korea, data compiled by Bloomberg show.

The Sensex has rallied 22 percent from a February low. The index is valued at 16.5 times projected 12-month earnings, compared with a five-year average of 14.4 times. The MSCI Emerging Markets Index is valued at a multiple of 12.6.

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  • IDBI Bank Ltd. tumbled 2.9 percent after second-quarter profit more than halved on bad loan write offs.

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