Thursday, 27 October 2016

Tata vs Mistry: Glass vs Mirror

A Glass doesn’t hinder our view of the world and we can look through it; it never gives back anything to us. But you paint the glass from one side and it becomes a mirror. But a Mirror can be irritating as it shows us our ugly face. It just reflects the reality. And in the moments of despair and madness we can break the Mirror. So Cyrus Mistry is broken. But I am really at shock over what has happened with TATAS...i can't expect this type of nasty fight from Tatas. I am feeling bad for this guy Cyrus...i don't think that he was doing a bad job with all the heavy load of expensive investments at wrong times. I don't think that decisions regarding sale of Corus and fight with Docomo for denial of buying of right issue was entirely of Cyrus....what was Board of directors doing?
So Cyrus has left a bomb over Tatas...but i hope it is not a time bomb and will explode now only to have the momentary impact. But there is no need to panic and pressing the sell button. Just hold on to your fronts and no need to make any surgical strike either (Buying). Let time clears the clouds.
But it is always not hard to fathom your wrong turns; the hardest thing is to accept these-especially publicly. In the dream world of becoming hard core Indian MNC, Tata made some nasty investments that too at the peak of commodity cycle. Tata's bought Corus at mighty price of $12 billion. I can't understand how they couldn't see the coming over-supply in the steel world....China couldn't alone drive the world steel demand and if it was doing it could never be forever and not sustainable at all. Now China is fearing the heat of huge amount of melted steel used by it for creating unnecessary redundant infrastructure. How our so called highly paid economists/CFO's can't take precautions while going for expensive decisions if they can't predict the over-supply or lower demand.
Jaguar buy saved Tata although Jaguar has sparkled because of high china growth and only Tatas can tell whether their decision to buy Jaguar was due to this china story or they were trying to buy a premium prized asset for western markets. Indian Hotels bought some costly international properties when growth in Indian market was the visible choice. Global MNC giants were investing in India but Tata bought international properties. I think Cyrus was right in shedding the Fat when he sold some of these high prized hotels.
But we all do is our right to make mistakes in our path to success and glory. But when we make some mistake and later when we realize it, our focus should always be on solving it and finding the solutions. But what is Tata doing off is investing into Airlines business which is also a high capital intensive business and prone to high losses for 5-10 years. That can't be the right approach...Tata should have been concentrating only on solving the mess of Mundra plant, Corus deal etc. Tata global still needs to find a way to grow its Himalayan Mineral water business for long....Starbucks JV is operating in dangerous price conscious Indian Market. So Tata is at inflection point and some tough decisions are required-no point in clinging to your faults.
I remember how Kishore Biyani is trying to save his retail business. In this quest he has sold so many of his prized dream assets like Pantaloons, Capital first etc. Jain irrigation has taken some tough decisions and they have really saved the day for themselves.
So i think this fight my turn ugly and we'll see more pain for Tata stocks although i think recent 10-12% fall is already severe and more than enough. But i don't find anything fishy and material in this 1.18 lac crore loss in the value of Investments in Power, steel business. Businesses do witness prolong periods of downturn due to economic and industrial slowdowns or over-supply. The only option and strategy is to pass/live through these difficult times gracefully. I think Tata can solve the mess of its power, steel and tea businesses.

I am still having the faith in Tata group...but the only thing i am worrying is whether they can do this Gracefully?

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