Note ban shaves ~1.2-lakh cr off consumer goods stocks While FMCG companies lose ~98,928 crore in m-cap, consumer durables stocks are down ~20,673 crore since November 8
Tribunal directs Mistry to file a reply within a week; to hear the matter on January 31
Investors of consumer goods stocks have lost ~1.2 lakh crore since November 8 — the day the Union government demonetised ~500 and ~1,000 notes — as stock prices of fast-moving consumer goods and consumer durables firms continue to trade at lower levels.
The BSE’s fast-moving consumer goods (FMCG) and consumer durables indices, which cover major consumer goods firms, on Wednesday stood 9.8 per cent and 18.4 percent lower, compared to their pr ede mon et is at ion levels. The two indices have together lost ~1.2 lakh crore or 10.6 per cent of their market capitalisation (m-cap), at ~10,04,969 crore. While FMCG companies, included in the BSE FMCG index, lost ~98,928 crore of their m-cap to ~9,13,428 crore since November 8, the m-cap of the BSE Consumer Durables index went down by ~20,673 crore, to ~91,541 crore in the corresponding period.
Other major sectoral indices which have lost significant shareholder value are the BSE Realty Index (down 13.4 per cent) and BSE Auto index (down 10.3 per cent). Sales of property and automobiles have also been impacted.
Cigarettes-to-hotels major ITC’s m-cap has been impacted the most. Its investors have lost ~34,541 crore, with stock losing 11.1 per cent since demonetisation. ITC had a mcap of ~3.1 lakh crore on November 8, compared with ~2.75 lakh crore on Wednesday.
Hindustan Unilever, the second largest consumer goods firm after ITC, hasn’t declined as much – it is down 6.4 per cent with an m-cap of ~1.7 lakh crore. Other companies such as Nestlé, Dabur, Emami and Titan have lost between 10 and 18 per cent of their market value.
According to analysts, the cash crunch will hurt the October-December quarter and the pain may continue in the next two quarters. “As investors have started to realise that lack of enough liquidity in the market may affect the quarterly sales performances of firms, they have started to revisit their estimates, leading to a fall in stock prices and m-cap,” said Kunj Bansal, chief investment officer at Centrum Wealth Management.
It was not a routine hearing by the National Company Law Tribunal (NCLT) on Thursday as it was the first court room encounter of India’s largest conglomerate, Tata group, with ousted chairman Cyrus Mistry.
Unlike the usual court rooms, NCLT is more an office with a large conference room at the Fountain Telecom Building, Mumbai. The tribunal room, known for its sophisticated hearings, sounded quite noisy on Thursday. It was packed with lawyers, media personnel and shareholders.
The case was so unusual that the tribunal said, “This case not only concerns the reputation of Tatas but also of the country. It is a case involving all of us. It will have international implications.” After a 90minute debate, NCLT directed Mistry to file a reply within a week on the alleged oppression of minority shareholders and mismanagement by Tata Sons, its directors and Ratan Tata, as claimed by the ousted chairman’s familycontrolled firms. The case was adjourned till January 31.
Shapoorji Pallonji Group investment firms Cyrus Investments and Sterling Investment Corporation had moved NCLT against Tata Sons on Tuesday. A petition was filed under sections 241, 242, 244 of the Companies Act. The tribunal, headed by BS V Prakash Kumar and V Nallasenapathy, had asked Tata Sons to file a response within two weeks to the petition. Thereafter, another 15 days were given to all parties to file additional affidavits and rejoinders. The tribunal had also directed both the parties not to violate the time schedule, issued on Thursday.
Mistry’s counsel Aryama Sundaram questioned Tata group’s investments in “legacy hotspots” such as “overpriced and bleeding Corus acquisition, doomed Nano car project”. Besides, the counsel also claimed Tata Sons was in danger of violation of the securities regulation that mandated a need-to-know treatment of such information.
The tribunal was reportedly not satisfied with the allegations against Tata Sons and its directors, Tata Trusts and its trustees and Ratan Tata made by Mistry’s counsel. It asked him to present documented proof to support these. It said the decision and losses related to projects like Corus and Nano, as mentioned by the petitioners, could not be argued under Section 241 of the Companies Act.
In a reply to the questions raised by the judges, Sundaram said: “My petition is against the trustees of Tata Trusts, oppressing Mistry’s firms’ interests as a shareholder. He seeks limited interim relief in the company petition. He urges the tribunal to refrain Tata Sons from issuing fresh securities, which will result in dilution of present equity paid-up capital of 18.37 per cent, held by Mistry’s firm. He also requests the tribunal to direct Tata Sons not to remove Mistry from its board and also to restrain them from making any changes in the Article of Association, unless such changes have been made with the leave of this tribunal.”
However, the tribunal did not grant relief to Mistry and ordered that no further applications for interim relief would be allowed in any court or forum until the matter was disposed of by the NCLT. Senior advocate Abhishek Manu Singhvi, who was representing Tata Sons, said the petition should be dismissed immediately, while agreeing to submit his reply within the time period stipulated by the court.
“Tata Sons believes the petition is not maintainable in law and the Court will hear Tata Sons on this issue at the outset at the next hearing. It does not wish to state any further, since the matter is subjudice,” Tata Sons stated.
The tribunal was reportedly not satisfied with the allegations against Tata Sons and its directors, Tata Trusts and its trustees and Ratan Tata made by Mistry’s counsel