The Weekly Wrap | Farewell, Mr. Tata
In this edition, we talk about the end of an era with the death of industry doyen Ratan Tata. We also talk about the RBI’s monetary policy review, the quarterly earnings of TCS, and why Ola Electric was in news for all the wrong reasons.
Welcome to Kuvera’s weekly digest on the most critical developments related to business, finance, and the markets.
"In the heart of India, a legend stands tall
A visionary’s spirit answering the call
With a legacy of steel, and dreams in his eyes
Ratan Tata’s name, it lights up the skies…”
Thus goes an ode to Ratan Naval Tata that went viral hours after the businessman, who led the steel-to-software conglomerate Tata Group for decades, passed away on Thursday at 86.
Ratan Tata’s life is a testament to the fact that our life’s circumstances can often be much bigger than we can ever imagine them to be. He was, after all, never supposed to head the century-and-a-half-old Tata Group. His grandfather, Hormusji Tata, was a spinning master and was only distantly related by blood to the Tata family that owned the business.
Ratan’s father, Naval Tata, was sent off to an orphanage after Hormusji died and his mother struggled to make ends meet. It was there that he was adopted at 13, by Navajbai, the wife of Sir Ratanji Tata, whose father Jamshedji had founded the group back in the 1800s.
But for this sudden change in Naval’s circumstances, his son Ratan would perhaps never have joined the Tata Group, and we may not have been paying homage to him here.
However, we remember Ratan Tata not because he headed a multi-billion-dollar empire or because it grew manifold over the two decades that he was at the helm. After all, many a man (and woman) have managed to set up and grow their business empires to towering heights, oftentimes, in a single generation.
We talk about him as he was a large-hearted man and perhaps one of India’s most admired billionaires, at least of our times.
His adoptive uncle, JRD Tata, named Ratan his successor in 1991, much to the chagrin of the heads of the group’s various subsidiaries. But Ratan Tata would go on to consolidate his position, implementing a retirement age policy for board members and mandating group companies to contribute their profits to building the Tata Group brand.
In the two decades that he headed Tata Sons, Ratan Tata managed to grow the group’s revenue by over 40 times and its profits by more than 50 times. Under him, Tata Tea acquired the UK’s Tetley brand, Tata Motors bought Jaguar Land Rover, and Tata Steel added Corus to its portfolio of companies.
While his moves weren’t always successful, they did reposition the Tata Group from an India-centric conglomerate into a global entity, with more than half its revenues coming from outside the country, especially from companies like Tata Consultancy Services, which, under him, became a software giant to be reckoned with.
Like any other businessman, he had his share of failures—a case in point being the Tata Nano. But look beyond the balance sheet and you would perhaps see how the project reflected his large-heartedness. Tata wanted every two-wheeler-owning middle-class Indian family to move to a low-cost car. That it never really took off, is another matter.
His magnanimity also shone through in how he stood steadfastly with the families of staff members of the iconic Taj Mahal Hotel who died in the 2008 Mumbai terrorist attacks. Not only did he rebuild the hotel to its pristine glory, but also ensured that every affected family member of a slain employee received lifelong support from the Tata Group.
And then there was his love for dogs. Not only did Tata swoon over his own dogs, he also made sure the strays of India’s financial capital, including those in and around Bombay House, were taken care of.
You can have all the money in the world, but you cannot buy class, goes an old adage. Ratan Tata had both, and in good measure.
So long, sir!
Shifting into Neutral
Moving on to more mundane things, when the US Federal Reserve cut interest rates last week, marking its first reduction in four-and-a-half years, expectations rose that the Reserve Bank of India could soon follow suit.
But the RBI’s monetary policy committee kept the repo rate unchanged this week. To be sure, analysts and economists mostly expected the rates to remain on hold for a few more months.
Still, the RBI gave a strong indication that the rate cuts are in the near horizon as it changed its policy stance to “neutral” from “withdrawal of accommodation”.
The RBI has kept the repo rate on hold at 6.50% since February 2023, after raising it from 4% in early 2022 as inflation galloped amid the economy’s recovery from the Covid-19 pandemic.
However, macroeconomic indicators are now showing worrying signs. GDP growth came in at 6.7% in the April-June quarter, down from 8.2% a year earlier. Factory activity slowed to an eight-month low in September while services output fell to a 10-month low, according to S&P Global’s widely tracked Purchasing Managers’ Index.
Meanwhile, inflation has fallen below the RBI’s 4% target. “It is with a lot of effort that the inflation horse has been brought to the stable,” RBI Governor Shaktikanta Das said.
But he also offered a warning. “We have to be very careful about opening the gate as the horse may simply bolt again. We must keep the horse on (a) tight leash so that we do not lose control,” Das said.
Indeed, while the RBI retained the average inflation forecast at 4.5% for 2024-25 and inflation was at 3.65% in August, a few things can play spoilsport. For one, food prices have risen again with tomato cruising towards Rs 100 a kg.
And then, there is the Middle East factor. Any further escalation in tensions in the region could push crude oil prices higher, affecting India adversely as it imports more than 80% of its requirements.
So, what’s the bottom line, you may ask? Essentially, what this means is that rate cuts are just around the corner. For borrowers, the EMI burden will get a tad easier to lift. Savers, you may want to lock in fixed deposits at higher rates!
Recovery amid Uncertainty
Talking about bottom lines, the quarterly earnings season is here and—like always—Tata Consultancy Services is first off the blocks.
India’s biggest IT services exporter reported consolidated revenue of Rs 64,259 crore in the July-September quarter, up 7.7% from a year earlier. Net profit climbed 5% to Rs 11,909 crore. The results were a mixed bag of sorts—while revenue came in above Street estimates, profit fell a tad short.
TCS results showed some positive signs. For one, the company said that its biggest vertical—banking, financial services and insurance (BFSI)—recorded a 0.1% rise in revenue from a year earlier.
“Amidst an uncertain geopolitical situation, our biggest vertical, BFSI showed signs of recovery,” TCS CEO and MD K Krithivasan said in a company statement.
This raises hopes of many other Indian IT companies, too, as the BFSI vertical is a big money churner for them. Still, it’s a little too early to talk about industry trends at the moment. TCS’ top competitors will come out with their earnings next week—HCL Tech on Oct. 14, followed by Infosys and Wipro on Oct. 17 and Tech Mahindra two days later. So, let’s wait for a few more days before raising our expectations from the IT industry.
Crashing into a Comedian
Bhavish Aggarwal had every reason to remember the first few days of August. That month, Aggarwal’s Ola Electric became the first electric vehicle maker in India to float an initial public offering. The Rs 6,145 crore IPO got bids worth over Rs 15,000 crore. The stock gained nearly 20% on the first day, ending at a little over Rs 91. It then soared over the next fortnight and hit Rs 157.53, or more than double the IPO price, on Aug. 20.
Now, the stock has dropped over 40% to its listing day levels and the company’s market valuation has dropped to around $4.7 billion from more than $8.2 billion.
So, what really happened?
Well, for one, the initial euphoria about the loss-making company’s growth prospects cooled off. And then, this week, Ola Electric crashed into a comedian!
No, we don’t mean an Ola e-scooter ran someone over. We are talking about founder Aggarwal’s public spat with well-known standup comedian Kunal Kamra.
Kamra tweeted a photo showing unsold Ola scooters and noted the problems gig workers were facing because of delays in fixing their vehicles. This was followed by a raft of online complaints related to after-sales services by Ola users.
Aggarwal shot back, asking Kamra to “sit quiet” and let the company fix the issues. This was not all. He accused Kamra of writing a “paid tweet” and derided him over his “failed comedy career”. This was still not all. He then told Kamra he would give him a job and pay him more than he earned. Phew!
The day after the spat, Ola Electric’s shares plunged 9% and have since fallen further. The growing complaints against Ola have now prompted authorities to act. First, the Central Consumer Protection Authority sent a show-cause notice to Ola for “alleged violation of consumer rights, misleading advertisement and unfair trade practices”. The notice came after the government received more than 10,000 complaints against the company over the past year.
Later in the week, the Ministry of Heavy Industries asked the Automotive Research Association of India, a testing and certification agency, to conduct an audit of Ola Electric’s service centres.
All in all, this wasn’t a week Aggarwal would like to remember.
Market Wrap
Indian stock markets remained weak this week amid geopolitical tensions and as they awaited signals from quarterly earnings. While the stimulus measures announced by China boosted foreign inflows into Asia’s largest economy, the Indian markets were supported by continued inflows from mutual funds.
According to the Association for Mutual Funds in India, equity mutual funds received Rs 34,419 crore in September, down 10% from August. Still, this is the 43rd month in a row that MF flows have remained in positive territory.
For the week, the 30-stock Sensex slipped 0.3% while the 50-stock Nifty lost about 0.2%. Both indices had slumped nearly 4.5% last week.
Tata Group’s retail arm Trent was the biggest gainer this week, climbing over 10%. Other stocks that rose during the week included automakers Mahindra & Mahindra and Maruti Suzuki, and IT companies HCL Tech, Infosys and Tech Mahindra.
Kotak Mahindra Bank, Bharti Airtel and Apollo Hospitals were among the other Nifty winners.
Another Tata Group company, Titan, led the decline, falling over 5% during the week. FMCG stocks Nestle, Hindustan Unilever, ITC, Britannia and Tata Consumer were among the top losers.
Other stocks that lost during the week included SBI Life Insurance, Tata Steel, IndusInd Bank, TCS and Power Grid Corp.
Other Headlines
That’s all for this week. Until next week, happy investing!
Interested in how we think about the markets?
Read more: Zen And The Art Of Investing
Watch here: