The Hindu Business Line : Tata group companies attract market interest

Shares of Tata Group companies - Tata Steel, Tata Coffee, Tata Tea, Tata Power and Tata Chemicals - are attracting investor interest after Tata Sons' decision to hike its stake in Tata Steel.

This move raised hopes of investors that promoters may make similar moves in other group entities as well.

Though the decision to hike stake in Tata Steel was in the light of the global consolidation in the steel sector and may not result in similar immediate moves in other group companies, analysts said investors are seeing the move as "positive" and "investor-friendly".

The Chairman of Tata Sons, the holding company of Tata Group companies, Mr Ratan Tata, had announced on Wednesday that the group would increase its stake in Tata Steel by 10 percentage points to 37 per cent through a preferential offer before end of this fiscal.

Investor-friendly

"The group was not seen as investor friendly over the years. But that image is getting changed if you look at the bonuses and dividends announced by Tata Group companies in recent past," said Mr Gaurang Shah of Geojit Financial Services.

Further, Tata Group companies are not likely to see ownership or related issues, unlike other family-controlled business such as Reliance and the Birlas, he pointed out.

Tata Steel shares are trading at Rs 547.30, up 7.29 per cent over the week's time, while Tata Tea has gained 18.60 per cent over the one-month period to Rs 754.25. Tata Coffee, which announced the acquisition of Eight O'Clock, the third largest coffee brand in the US, is also seeing decent volumes. The shares have risen by 26.23 per cent over the last one-month period to Rs 376.55.

"I don't think Tata Coffee faces any takeover threat. In any case, due to the cyclical nature of the industry, there are risks attached for any attempt to takeover this company," said Mr Vishal Shah, an FMCG analyst with Techno Stocks.

Comfort zone

Analysts also point out the fact that Tata Tea holds over 50 per cent stake in Tata Coffee, a comfortable scenario for the promoter group.

However, the so-called investor-friendly perception about Tata Group may take a hit if Tata Coffee makes its proposed rights issue unattractive in its board meeting slated for July 13.

Analysts said Tata Coffee may make the proposed rights offer less attractive, considering that the shares have moved up in a big way in recent days. As per the earlier plan, Tata Coffee was offering two shares for every five shares held as rights at a price range Rs 220-280.

"The Tata Group has been looking to increase the stake in group companies, especially in those companies that are core to its business plans," said Mr Sriram Iyer, Head of Research at Edelweiss Securities. But, the situation that existed in the steel sector does not exist in all other industries, he added.

After unwinding of its cross-holding structure in several group entities over the last 2-3 years, Tata Sons now has comfortable stake levels but not fully-secured levels of holding structure, analysts said.

For instance, in Tata Motors and Tata Power, the promoter group holds about 33 per cent each. In Tata Tea and in Tata Chemicals, the promoter holdings are lower at around 28 per cent each.