India Stocks Drop as Ousted Tata Chief Warns Group of Writedowns

  • Cyrus Mistry defends his record in letter to Tata’s board
  • Axis paces declines among banks as bad-debt provisions surge

Indian stocks slid the most in two weeks, led by Tata Group shares after its ousted Chairman Cyrus Mistry warned that the salt-to-steel conglomerate may face $18 billion in writedowns because of five unprofitable businesses he inherited.

Axis Bank Ltd. plunged after it reported a five-fold increase in provisions, dragging down a gauge of lenders by the most in two weeks.

Tata Motors Ltd. and Tata Steel Ltd. tumbled more than 4 percent each, while Indian Hotels Ltd. fell to a five-month low. Mistry in an e-mail on Tuesday to the board of group holding company Tata Sons Ltd. said he inherited a debt-laden enterprise saddled with losses. He singled out Indian Hotels, Tata Motor’s passenger-vehicle operations, Tata Steel’s European business as “legacy hotspots." 

IndexChangeSize and scope
BSE Sensex-0.9%Most since Oct. 13
NSE Nifty 50-0.9%Second day of declines
S&P BSE MidCap-0.9%Third day of drop
S&P BSE Bankex-1.9%Halts four-day advance

“On the face of it Mistry’s letter does look scary but we would suggest investors to look for value in some of these stocks,” Rajesh Agarwal, the head of research at AUM Capital Market Pvt., said by phone from Kolkata. Agarwal said he’s bullish on Tata Global Ltd., the Indian partner of Starbucks Corp. “The stock needs to be accumulated. If it falls further from here, it becomes a screaming buy.”

Mistry’s comments help shed light on the power struggle occurring at the $100 billion group in the run-up to Mistry’s ouster, which stunned India’s business community. Mistry had been pushing 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.

Axis Bank slumped the most in more than a year after the lender posted a 83 percent plunge in second-quarter earnings. The bank set aside 36.2 billion rupees to cover soured loans, up from 7.07 billion rupees a year ago. The earnings mark the continuation of the problem the lenders have been struggling to curb. The stressed-asset ratio in India’s banking system is at a 17-year high.

“Bad-loan issues have once again come to the fore and the uncertainty surrounding the Tata Group has created doubts in people’s mind,” Paras Bothra, vice president of equity research at Ashika Stock Broking Ltd., said by phone. “Some investors think it is prudent to take money off the table."

The Sensex has rallied 21 percent from a February low. The index is valued at 16.3 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 12.5.

  • Hindustan Unilever Ltd., India’s biggest household products maker, rose 1.3 percent after its second-quarter profit beat estimates.

  • Jubilant Foodworks Ltd. plunged 7.8 percent after its net income missed estimates.

  • Idea Cellular Ltd. rallied 4.5 percent as investors saw value at lower levels.

  • L&T Finance Holdings Ltd. gained 1.9 percent to a record after its earnings beat estimates.
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