Cyrus Mistry’s return, a short-term uncertainty to Tata Group!

On Wednesday, the appellate tribunal reinstated Cyrus Mistry as Tata Sons Chairman while calling the appointment of
Natarajan Chandrasekaran as unlawful.

While the ruling is a set back for Tata Group, its implications are already felt on the share price of various companies from the Tata stable.

The trend is likely to continue until the controversy over the group chairmanship is resolved.
Shares of Tata Group companies declined substantially from their highs on Wednesday after an appeals court passed the ruling on ousted chairman Cyrus Mistry.

The Tata Motors ADR was trading 2.51% lower at $12.45 at 7 pm.

The Tata Motors stock, which was trading higher on NSE, declined 5.3% from its intraday high to close at Rs 174.80, down 3%.

From a day’s high of Rs 327.40, the Tata Global stock plunged 4.6% to settle at Rs 312.35.

The Tata Steel stock declined 2.5% from the intraday high to close at Rs 444.75, 1.22% higher.

The Indian Hotels stock declined 2.88% to close at Rs 145.20 while shares of Tata Chemicals and Tata Power fell 2% and 1%, respectively.

Tata group-owned companies are likely to underperform if the tussle between the two groups continued.

On Wednesday, the NCLAT bench headed by Chairperson Justice S J Mukhopadhaya pronounced its judgment on the matter.

A two-judge panel of the tribunal said that Ratan Tata’s actions against Mistry were oppressive and the appointment of a new chairman was illegal.

The court also said Tata Sons’ move to turn private from a public company was unlawful and ordered a reversal.

The order will take effect after four weeks and Tata has the option to challenge the ruling in Supreme Court.

Even if Mistry actually comes back at the helm at the group, market experts see no major reversal of decisions taken by the current chairman, Chandrasekaran.

Earlier, the Mumbai bench of the National Company Law Tribunal (NCLT) had dismissed the petitions filed by the two investment firms, Cyrus Investments and Sterling Investments Corp, challenging Mistry’s removal. Later, Mistry also personally approached the NCLAT over the NCLT order. NCLAT said that the NCLT’s earlier order was avoidable.

Net net we understand that this legal battle will now take a long time to be settled again and in the near term would act as a market dampener

There may not be some widespread selling in any of the Tata stocks as fundamentals of all the businesses yet continue to be strong but there are possibilities that future actions of the group may be questioned and hampered by the Cyrus Mistry camp

All in all for investors if stall there is any panic sell-off here we believe this would be a good time to accumulate such blue-chip stocks in their portfolios as once this legal matter gets resolved then it would be back to business as usual.

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