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Amid indications that former Tata Sons chairman Cyrus Mistry could be digging his heels for a prolonged battle, top officials of Tata Steel met analysts, fund managers and financial institutions to assure them that it is business as usual in the $103-billion group. LIC alone has investments aggregating close to Rs 36,000 crore in various Tata companies.
Stocks of various Tata companies continued to slide for the third day in succession as investors unloaded stocks fearing repercussions of the Tata-Mistry war. Indian Hotels plunged by 5.27 per cent amidst rumours that the managing director of Taj Hotels had quit. Tata Global fell 5.12 per cent and Tata Teleservices 9.72 per cent, Tata Chemicals 1.98 per cent and Tata Communications 1.68 per cent. However, Indian Hotels Company and Tata Sons later clarified that “reports about the exit of Rakesh Sarna, managing director and CEO of Taj Hotels Resorts and Palaces, are completely baseless and unfounded”.
Mutual funds and brokerages are worried about the role of Cyrus Mistry as chairman of group companies like Tata Steel, Tata Motors, TCS, Indian Hotels and Tata Global Beverages. Mistry had chaired the board meeting of Tata Global Beverages on Tuesday, a day after he was ousted as the chairman of Tata Sons. “It is not easy to remove the chairman of a listed company. There is a procedure for the process. The Tatas are in for a long haul to keep Mistry out of top positions in the group. The market cap of listed Tata companies has fallen by close to Rs 27,000 crore in the last three days. Foreign investors are also likely to get nervous if the situation continues for a long time,” said Pawan Dharnidharka, a BSE broker.
According to a fund manager, Tata Steel officials said there are no changes in the plans for its European steel business. Tata Steel had stopped the sale process of its Port Talbot steel plant in Britain and decided to explore partnership opportunities in July this year. They told analysts that there were no concerns about the group’s steel business in the wake of the exit of former chairman Cyrus Mistry as boss of Tata Sons. LIC alone holds over 13 per cent stake in Tata Steel.
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In his mail to Tata Sons directors on Wednesday, Mistry had said, “the European steel business faced potential impairments in excess of $10 billion, only some of which has been taken as of date.” while the European operations (Corus) were acquired when Ratan Tata was the chairman of the group, Mistry was keen on selling off the division in view of huge losses.
Germany’s ThyssenKrupp AG was one of the companies with whom partnership was being discussed. Thyssenkrupp was open to integrating Tata’s British unit in the joint venture, the Essen, the German company wants Tata to find a way to fund its UK pension scheme obligations as a precondition. Tatas want to include the UK division in the Thyssenkrupp project, which would give it a bigger stake in the overall venture. Tata Steel had said in the past five years it suffered asset impairment of $2.4 billion due to the UK operations.
On Indian Hotels, Mistry had alleged “Indian Hotels, beyond flawed international strategy, had acquired the Searock property at a highly inflated prices and housed in an off balance sheet structure. In the process of unravelling this legacy, Indian Hotels has had to write down nearly entire its entire networth over the past three years. This impairs its ability to pay dividends.”
Tata Steel and Indian Hotels said they have always made all relevant disclosures and have no further comments to offer following comments made by ousted Tata Group chairman Cyrus Mistry that Tata group firms could face a potential $18 billion writedown. “The financial statements of the company are prepared on a going concern basis and present a true and fair view of the state of affairs of the company. As part of preparation of financial statements, the value-in-use of the assets of the company is tested for impairment as per accounting standards,” Tata Steel and Indian Hotels Company said in a filing to the BSE.
Stock exchanges late last night sought clarifications from select Tata companies on reports about Mistry listing out possible write-down risk to the tune of $18 billion even as stocks of group companeis have been losing value for three days.