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27
October 2016
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Tata Sons (The Total Investment & Insurance
Solutions)
With all the
controversies engulfing the Tata group these days, we took a look at the
shareholding pattern of the Tata Sons and also the major companies under the
group. This will help us understand what kind of influence can be wielded by
different groups of shareholders in board-level decision-making. Remember,
although Cyrus Mistry has been sacked as the chairman of Tata Sons, he remains
the chairman of all major operating companies such as Tata Motors, Tata Steel,
Tata Chemicals, Tata Beverages, Tata Consultancy Services and Indian
Hotels.
Tata Sons is
the unlisted holding company of the group. Some 66% of its shares are owned by
the various Tata trusts, mostly importantly Sir Dorabji Tata Trust (27.97%) and
Sir Ratan Tata Trust (23.56%). The next major chunk of 18% is controlled by
Shapoorji Pallonji Group, whose heir apparent is Cyrus Mistry. As much as 12%
is held by various Tata companies like Tata Motors, Tata Chemicals and Tata
Steel and about 3% is held by individuals. If the trusts are in Ratan Tata’s
control, there is little Shapoorji Pallonji group can do except bide their
time, until Tata is unable to exercise much influence. Time is certainly on
Mistry’s side. The Total Investment
& Insurance Solutions
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Tata Sons 1(The Total Investment & Insurance
Solutions)
At Tata
Motors, the shareholding pattern is dominated by Foreign Institutional
Investors (FIIs) who have 45% of the total shares of the company. The promoters
hold 33%, Domestic Institutional Investors (DIIs) hold 14% and the public holds
just 8%. Here, Ratan Tata is on a sticky wicket. While his lucky strike with
Jaguar Land Rover has paid off, FIIs could put pressure on the management to do
something about the domestic business which is doing badly. Ratan Tata’s
passenger car ambition, showcased with great fanfare less than two decades ago
has sputtered. In domestic heavy vehicles, Ashok Leyland has stolen a march
over Tatas while Eicher and Volvo are also eating away at its market share.
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Tata Sons 2(The Total Investment & Insurance
Solutions)
The
shareholding of Tata Steel is dominated by DIIs (32%), followed by promoters
(31%), with the public holding 22% and FIIs holding 15% of the total shares. Mr
Mistry had managed to partly undo the problems at Tata Steel. Remember Tata
Steel, Ratan Tata’s misadventure, tried to gobble up the much larger Corus
Steel exactly at the peak of the steel boom. Mistry managed to get rid of the
bleeding Corus. The Total Investment
& Insurance Solutions
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Tata Sons 3(The Total Investment & Insurance
Solutions)
Tata
Consultancy Services (TCS) is dominated by promoter holding of 74% of the total
shares. The FIIs hold 17%, DIIs hold 4% and the remaining 3% is held by the
public. TCS is the cash cow of the group. It seems inevitable that Tata Sons
will try to push Mistry out of TCS. Tata Global Beverage Limited, formerly
known as Tata Tea Limited, is another company which Ratan Tata had used to make
ill-fated international acquisition. In it, Tatas hold 36%, the public holds
30%, DIIs hold 19% and FIIs hold 15%. Tata Chemicals is another large company
of the group where 31% of the shares are held by promoters, 28% is held by
DIIs, 22% is held by the public and 19% by FIIs. The Total Investment & Insurance Solutions
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Tata Sons4(The Total Investment & Insurance
Solutions)
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Tata Sons 5(The Total Investment & Insurance
Solutions)
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Tata Sons 6(The Total Investment & Insurance
Solutions)
It is
surprising to see such large FII holdings in so many poorly-performing Tata
companies. Whether the FIIs are lending their name is an open question.
In any case,
the benefit of doubt in this unseemly war seems to be going to Cyrus Mistry.
Hardnosed investors like FIIs see Rata Tata as a terrible allocator of capital.
Mistry has positioned himself as undoing Tata’s ego-driven wrong acquisitions.
Who will FIIs back? The Total Investment
& Insurance Solutions
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