Tata Group of Companies: Tata group, we have analysed 8 stocks of Tata group of companies (Tata Sons) such as Tata Consultancy Services, Tata ELXSI, Tata Motors, Tata Consumer Products, Tata Coffee, Titan, Trent and Voltas.
Tata group of companies Analysis
We are going to talk about such a promoter that has the highest stake in the listed companies of India. This means that about all listed companies that trade on BSE and NSE there is a promoter that has an Rs. 9.28 lakh stake on them. Before this largest stake was held by the central government. But in the last few days, this promoter has outshone central government and has held the highest stake in listed companies which is 9.28 lakh cr. While (if I talk about central government) the entire stake of PSUs held by the government is Rs.9.24 lakh crore. It means that in recent times this promoter has replaced the central government in terms of valuation.
If you have not guessed the promoter's name then let me tell you that today we will talk about Tata sons. A lot of companies of Tata sons that trade on the stock market. Hence we will break this article into two parts.
Tata group of companies
In this article we will discuss about 8 companies that trade on share market and whose promoter is Tata sons. I will talk about their business, competitors and financials as well. So that you get an idea of companies that trade on share market with Tata sons as their promoter.
TATA Sons
Lets speedily start this article and talk about the first company of Tata sons. Lets quickly talk about the first company that belongs to Tata sons and trades on stock market.
Before talking about the first company let's talk about the entire IT sector. There are two such companies of Tata Sons that directly work in the IT sector. Tata consultancy services is India's second-biggest company in terms of market capitalization. First, I will talk about the IT sector.
In FY 20 it was estimated that total revenue from the IT sector was US$ 191 billion. Breaking this into export (to other countries) and domestic business the figures are US$ 147 billion and US$ 44 billion respectively. From here you can understand that the IT sector's total revenue is quite huge and a great amount is contributed by foreign exports. The companies serve foreign clients and generate revenue. I have used the foreign revenue term for this. Apart from this, the IT sector has garnered a lot of limelight.
When the Covid situation was at the peak a lot of industries suffered a negative impact and their revenue also fell. But the IT sector is the one which saw the least negative impact. When the covid situation was on the peak a lot of businesses moved online which directly benefitted IT companies. Besides this, as the employees of IT companies did not have to go to the office, the company's business did not face much negative impact. This sector has delivered great returns in recent times to its investors. So friends it is expected that the IT sector industry can grow to US$ 350 billion by FY 2025.
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Tata consultancy services
Now let's talk about the first company of Tata Sons. The name of this company is Tata consultancy services.
I gave you a glimpse of this company while talking about the IT industry. As you know that the market capitalization of this company more than Rs.10 lakh crore. Hence it is the second-largest company as per market capitalization.
Another interesting fact is that out of the total profits of Tata sons about 75% profit is contributed by Tata consultancy services. In total profit of Tata Sons, TCS is a 75% contributor i.e. about 3/4 contribution. This is a huge number. Hence TCS is an important company of the entire Tata group. TCS's business operates at 149 locations in 46 countries. You will understand that TCS business is almost spread in all important countries of the world.
Now we will talk about TCS in detail, its revenue from each geography, and the industry with the highest contributions to TCS. As you can see that the biggest contributor to TCS is North America. After this UK gives a 15.9% contribution. Next is Europe which is an important contributor to TCS revenue i.e. 14.7%. Asia-Pacific and India generate almost 9.3% and 5.7% revenue respectively.
After this let's talk about different sectors that contribute to the IT company's business. IT companies offer services to healthcare, auto segment, etc. Here it is important for you to understand the TCS revenue breakup as compared to different industries. Let me take you to my screen. As you can see on my screen, the biggest revenue chunk for TCS is the banking sector: BFSI at 30.5%. After this, their major revenue is from the retail sector at 15.2%. While the manufacturing and technology and services sector contribute 9.9% and 8.6% revenue respectively.
Another interesting fact about TCS is that it is an important wealth creator for India's investors. Its revenue CAGR growth from FY 2005-2020 is 16%. In the last 15 years, this company has maintained a 15% growth in its topline. But in terms of profitability, the CAGR growth is 19%. So you can understand that the company has grown and has created a lot of value in terms of wealth because of its consistency.
The competitors of TCS are Infosys, Mindtree L&T Infotech, and Wipro.
These companies directly work in the services sector and act as direct competition for TCS. The share price of TCS is around Rs.2,900. In the last one year, it has given a 34% return to its investors. Its immediate next competitor is Infosys. It has delivered more than 60% return to its investors.
Tata Elxsi
Now I will talk about the second company of Tata sons which is also from IT sector. An interesting thing is that this company's share price is around Rs.1,830. But in the last one year it has given more than 100% return to its investors. It means that if you would have invested your money over here then your money would be double by now.
The market capitalization of this company is around Rs.12,000 cr. If you have not guessed its name, then let me tell you that this company's name is Tata Elxsi.
The business of this company includes design and technology services to different business sectors. But their major business segment is the automotive sector. This contributes more than 42% of revenue. Their major focus is on the automotive sector. Broadcasting and communication are some other verticals where this company operates.
Now let's talk about the offshore revenue of this company. From US Tata Elxsi gets 36% revenue. While from Europe it generates 38% revenue. About 70% of revenue comes directly from Europe and the USA. The consistency in growth seen in TCS is also seen in Tata Elxsi in the last 5 years. Its profit CAGR growth of last 5 years is more than 19%. But consistency shown by TCS has been maintained for the last 15 years. But here we are talking of this company in last 5 years. In the future, the consistency and performance of this company will be known. The P/E ratio of the industry in which Tata Elxsi operates is 22. The P/E ratio of Tata Elxsi is around 34. The debt level of Tata Elxsi is negligible. You can call it a virtually debt-free company.
Its competition includes L&T Infotech that has given a great return to its investors in the last one year. So this was the discussion regarding the first two companies that directly work in the IT sector.
Tata motors
Now let's speedily move towards the third company that directly works in the Auto sector. This company has given a remarkable return to its investors in recent times. The name of this company is Tata motors.
You might know about Tata Motors. Its share price once trades for Rs.400-500. But it has not performed well in recent times. Its share price once fell below Rs.100. But currently, its (Tata motors) share price trades at Rs.180-185. Recently it has given a return of more than 100% to its investors. But for understanding its business it is important to understand the segments and auto industry outlook. The Auto sector was going through a slowdown for the last 2-3 years. But in recent times growth has been witnessed in this sector.
The CAGR growth for FY 16-20 has been 1.2%. The growth has been quite low in the Auto sector. But the trend of last few months shows growth in this sector. India's auto sector is the fourth largest car manufacturing industry in the world. For commercial vehicles this rank is 7th. In the entire world auto market, India is an important contributor where a lot of vehicles are manufactured.
In the discussion of automobile electric vehicles are very important.
As per the trends by FY 2025 India's electric vehicle segment will cross Rs.50,000 cr. A lot of automobile and technology companies have shown interest in working in this sector. Tata Motors is known for cars. But an interesting thing is that Tata Motors vehicle brands-Jaguar and Range rover contribute to 80% of revenue. The rise in the share price (invested) depends on the company's business.
Tata Motors business has a huge dependency on Jaguar and Range rover (that contributes 80% revenue) Important ratio - debt-equity ratio shows that Tata Motors has a high debt level. Its debt-equity ratio is 2.28. This is considered a huge number as compared to the entire automobile sector. For November month the total sales of Tata motors grew by 108%.
The Brexit impact was also seen over here. It is predicted that when the Brexit deal will be completed then the import-export restrictions will vanish. But this is a (far-fetched) speculation that you should not do. Instead, you should see the fundamentals of the business.
While studying about Tata motors it is important for you to know the continents that contribute to its revenue (apart from knowing that its 80% revenue is from Jaguar and Range Rover).
As you can see the company's revenue from North America, Europe and UK are $6.9, $5.6, and $5.7 billion respectively. It also has a dependency on China of $3.9 billion in revenue. I hope that this gave you an idea about its revenue dependencies on different companies. Tata Motors' current share price is Rs.183. The market capitalization of this company is Rs.60,000 cr. In the last one year, it has given a negative 0.33% return. But after March lows the company has risen above 100%.
I will not talk about the P/E ratio over here as Tata Motors is currently a loss-making company. Whenever a company incurs loss you cannot talk about the P/E ratio. Its major competitor is Maruti Suzuki who is the market leader in the passenger segment with a 50% market share.
Another major competitor of Tata motors is Eicher Motors that manufactures commercial vehicles. As you know that Tata Motors business is also spread in commercial vehicles. Hence its direct competition is with Eicher Motors.
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Tata consumer products
Now let's talk about the retail and consumer goods segment industry. The next company of Tata Sons is linked to this.
The retail sector contributes 10% to India's total GDP. In recent times this sector has emerged to be dynamic and fast-paced. A lot of new players have entered this sector which has resulted in fast-moving changes. Total consumption for FY 2020 is $3600 billion in India. This equals India's 10% GDP. So the first company that emerges out of this sector and is the fourth company of Tata Sons is Tata consumer products.
This is a company that directly operates in the FMCG sector. An important product of this company is Tata Salt. You might have used it. If you are not aware of this product then let me tell you that this product sold comes under Tata consumer products company. Besides this, it has other brands as well. Tetley is an important tea brand that operates in India and is owned by Tata's consumer products.
Earlier the name of this company was Tata's global beverages. Later its name was changed to Tata's consumer products. Recently Tata consumer products have shown a remarkable performance to its investors. In the last one year, this company has given more ta 80% return to its investors.
Currently, the share price of this company trades around Rs.580. The market capitalization of this company is Rs.54,000 cr.
The P/E ratio of this company is around Rs.61. But let me tell you that the P/E ratio in the FMCG sector is generally high. Hence this company also trades at higher valuations.
Tata coffee
So now let's talk about the next company i.e. the fifth company of Tata sons that is directly linked to Tata consumer products. As I told you that this company also works in the beverages segment. Over here Tata coffee works as a subsidiary of this company.
Tata coffee cultivates, does plantations and sells them as end products to the customers. The major cultivation areas of this company are Karnataka and Tamil Nadu. The major coffee cultivation locations are Coorg and Chikmagalur. Besides India, this company also operates in the US and UK.
The share price of this company is around Rs.107 and its market capitalization is more than Rs.2,000 cr. In last one year, it has given 16% return to its investors. The Return on Equity (ROE) of Tata coffee is around 10%. While the debt-equity ratio of Tata coffee is around 0.93.
Titan
This means that debt and equity are equal. Now let's talk about the sixth company of Tata Sons.
This is a famous company that you would have surely heard of. If you have not heard about it then let me tell you that it is directly linked to Rakesh Jhunjhunwala. Its name is Titan.
This company has given a multi-bagger return to him in recent years. I will directly take you to my screen for explaining this company to you. From here you will learn about the brands (launches also) of the company in a chronological way. This company as started in 1984.
In 1987 Titan brand was launched. After this in 1996 Tanishq brand was launched. Furtherore Sonata, Fastrack, and various other brands were launched by this company that operates in India.
An interesting thing about this is that it is the 5 largest watchmaker company in this world. Titan's business is spread to 32 countries (export). This company has more than 1,500 stores. This company's business is quite robust. In the last few years, this company has shown consistency in its revenues and profits.
The revenue CAGR growth of the last 5 years is around 12%. While profit CAGR growth is more than 15%. From here you get an idea that Tata's has shown consistency in performance in the last 5 years. The share price of Titan is around Rs.1,550. In the last one year, it has delivered a positive 34% return to its investors. This can be considered as a great return for the investors along with the covid impact.
The industry in which Titan operates has a P/E ratio of 30. While the P/E ratio of this company is more than 190. This means that the P/E ratio of this company is really high. While the debt-equity ratio of this company is 0.55.
Voltas
The seventh company of Tata sons was started in 1954. This company operates in an industry that has a lot of multinational players. This company has outdone all its multinational competitors and has become the market leader in its segment. The name of this company is Voltas. This company works in AC and refrigeration sector. The demand for ACs has grown in recent times.
Hence this company also witnessed growth. In FY 2020 company had 15,000 touchpoints to reach customers directly and sell their products. As I told you that Voltas is a market leader. In room AC segment Voltas has a market share of more than 23%.
Now let's talk about the consistency of Voltas in terms of financial performance. Its CAGR revenue growth of the last 5 years is 8%. While the profit CAGR growth is 6% for the last 5 years. The share price of Voltas is around Rs.831. In the last one year, it has given a 26% return to its investors.
Trent
Now let's talk about the eighth company of Tata sons. This is the last company of ourarticle. We will cover other companies in the next article. The name of this company is Trent. If you have not heard about Trent. Then let me tell you that it is Tata Sons company. This company business is selling ready-made clothes in the retail segment.
This is the company's major business. Apart from this, the business of the company is divided into three parts. First is Westside, second is Star, and third is Landmark. Westside sells footwear and other accessories that cater to both men and women. Star operates in India through 30 stores like brands like Star daily. Landmark is such a model through which they sell toys catering to family needs.
The share price of Trent is currently Rs.674. In the last one year, it has given a 24% return to its investors. This can be considered a remarkable number. While the market capitalization of Trent is Rs.24,000 cr.
Here I cannot talk about the P/E ratio as the normal P/E ratio of the industry in which this company operates is 87. But as this company is a loss-making one we will not discuss the P/E ratio.
So these are the eight companies for today that come under Tata sons (promoter).
In the coming time, we will bring one more article where we will talk about other remaining 8 Tata sons companies that trade on the stock market.
Comment below the companies where one should invest out of the discussed ones.
Happy investing!
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