Last week we saw that the visionary leadership of Ratan Tata has earned investors of the major Tata Group companies handsome returns during the last 10 years of his chairmanship. We compared 6 major Tata companies (check out last week's chart here) with the BSE 30 (Sensex) and all except Tata Steel performed heads and shoulders above this benchmark index. But how do each of these companies do compared to their direct competitors? Does Mr. Tata's charismatic leadership manifest itself as forcefully when viewed through this lens? Our short series over the next couple of weeks will try to answer exactly that.
We begin with the flagship Tata Motors. To be fair, TCS could just as easily qualify for the title of flagship but that is a discussion for another time. We have chosen the time window of June 2004 through February 2016 in order to include data for all 4 companies. As you can see below, Tata Motors (21% annualized return) is neck and neck with its arch rival Maruti Suzuki (23%). The Maruti Suzuki stock has seen a dramatic rise over the last 2 years. Since Feb 2014, the Tata Motors stock is down more than 25% while the Maruti stock is up more than 100%. It has enjoyed strong investor confidence due to its low debt and large variety of entry level models attractively priced for millions of first time middle-class Indian car-buyers. Tata Motors on the other hand, has been struggling in the passenger car market.
In the commercial vehicle sector, Mahindra and Mahindra and Ashok Leyland have been nipping at its heels. The company also appeared rudderless after its leader Karl Slym died under mysterious circumstances while the Tata Group spent 2 years trying to find his replacement. Mr. Tata showed gumption and foresight when he acquired Jaguar Land Rover from Ford in 2008. Apart from the JLR division which has posted strong sales in recent times and unveiled a range of new models, the company does not seem to be doing very well. We will leave it to industry insiders and consultants to opine on whether the company needs to focus on branding, strategy, or quality but Tata Motors- the company and the stock will very likely make a strong comeback as they repeatedly have in the past.