Up to 2,000% return! How Tata Group companies made investors lakhpati in just 17 months

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Those who invested in Tata Group of companies have made quick money on Dalal Street amid the ongoing rally since the lows of March 2020, when PM Narendra Modi announced the nationwide lockdown. Data shows that at least 20 group companies have more than doubled investors wealth in just 17 months. With a rally of 1973%, Tata Teleservices (Maharashtra) emerged as the top gainer in the list. Share of the company jumped to Rs 39.40 on August 13 from just Rs 1.90 on March 24, 2020. This means, Rs 10,000 invested in this stock in March last year has now turned into over Rs 2 lakh at present.

Other group stocks in the list include Tata Elxis, which rallied 684%. It was followed by Tata Communications (up 521%), Tata Steel Long Products (up 477%), Automotive Stampings and Assemblies (up 376%), Tata Motors (up 347%), Tata Chemicals (up 337%), Tata Coffee (up 316%), Tinplate Company (up 315%) and Nelco (up 308%).

Factors behind the rally

Analysts believe the company’s focus on debt reduction and improvement in margin were the key drivers. AK Prabhakar, Head of Research, IDBI Capital Markets said, “The group focus on the deleveraging balance sheet, asset-light business model, restructuring and objective to raise margin since the to appoint of N Chandrasekaran have been working in favour of the group.”

The data further highlighted that players like Tata Power, Tata Metaliks, Tata Consumer Products, TRF, Oriental Hotels, Titan Company, Trent, Tata Investment Corporation, Voltas, TCS, Rallis and The Indian Hotels Company have also gained between 84%-285% during the same period.

Latest report card

Overall, the Tata group of companies, which are part of the Nifty Tata index, posted 18% year-on-year (YoY) growth in net sales at around Rs 1.94 lakh crore for the quarter ended June 30. Net profit increased by 139% YoY to Rs 14,770 crore. On the top, Tata Steel recently posted a consolidated net profit of Rs 9,768.34 crore for June quarter 2021-22. In the year-ago period, the company incurred a net loss of Rs 4,648.13 crore. Total income climbed to Rs 53,534.04 crore during the quarter under review from Rs 25,662.43 crore a year ago.

In a statement, Tata Steel CEO and managing director T V Narendran said Indian markets were adversely impacted during the last quarter due to the second wave of Covid-19 which impacted the company’s steel production as well as deliveries. Among other Tata group companies, Tinplate, TRF, Tata Metaliks, Tata Communications, Orient Hotels and Tata Investment Corporation, Tata Power and Tata Elxsi also posted over 100% growth in bottomline in Q1FY22.

Mayuresh Joshi, head of equity research, William O’ Neil & Co India, said: “Strong earnings are getting reflected in strong price action. Some of the companies in the metal and IT space have been witnessing additional tailwinds. Others are elective leaders in their individual spaces and as the macro outlook improves with the added advantage of gaining market share at the behest of unorganised players would aid earnings momentum.”

Outlook

Market watchers believe that there are a lot of companies in the group that still can deliver a robust return to investors after the recent run-up. Prabhakar said, “We like Tata Steel, Tata Power, Tinplate and Indian Hotels. Tata Steel has reduced a lot of debt and we believe that European operations will turn around,” he said.

Brokerage Investec is also positive on Tata Steel with a target price of Rs 1,850. On the other hand, brokerage Emkay Global Financial Services is bullish on Voltas with a target price of Rs 1,120. “Continued market share gains in the RAC segment and a superior margin profile have been the key execution strengths of Voltas, which we expect to sustain,” Emkay Global said in a report.

G Chokkalingam, Founder, Equinomics Research and Advisory said, “This market rally favoured IT services and steel industry and Tata group was present in both with dominant leadership. Going ahead, the steel business might overtakes the IT in rewarding the group and also public shareholders. Those who hold TCS and Tata Steel may continue to hold and if they decline others may consider these two stocks. It is likely that small and midcaps will continue to underperform large caps in the short term. Hence, this strategy may be fruitful.”