TATA Group is one of India’s largest conglomerates, comprising 30 companies across ten verticals. The group operates in over 100 countries across six continents.
Tata Sons is the primary investment holding company and promoter of Tata Companies. The group’s presence spans a diverse array of sectors. As of March 31, 2024, 26 Tata companies are publicly traded, collectively valued at $365 billion (Rs 24 trillion). Despite this, two of these listed Tata group stocks have underperformed over the past 12 months.
Below are the two Tata Group stocks that have underperformed in the last 12 months
Tata Technologies Limited
Tata Technologies, a subsidiary of Tata Motors, has been a pioneer in the Automotive and Aerospace segments, providing industry-leading Engineering Research and design services (ER&D) that offer end-to-end solutions across the value chain with a focus on manufacturing-led verticals.
Tata Technologies Limited shares were listed on the stock exchanges on November 30th. Since then, the shares have declined by 24%.
Tata Technologies Limited is a mid-cap company with a market capitalization of Rs 40,350 crore. On Friday, the company’s shares opened at Rs 992.05 per share, a 0.12 percent drop from the previous close.
In the June quarter, Tata Technologies reported a 15% decline in consolidated net profit to Rs 162 crore, compared to Rs 191 crore in the same quarter last year. Revenue from operations saw a slight increase, rising to Rs 1,269 crore from Rs 1,257 crore a year ago.
In the June quarter, Tata Technologies experienced a 2.5% decline in constant currency revenue, primarily due to weaker growth in Tech Services. Additionally, its EBIT margin fell by 35 basis points sequentially to 15.9% in Q1 FY25.
Operating EBITDA for the June quarter reached ₹231 crore, with margins at 18.2% for the period. In terms of segments, services revenue declined 1% quarter-on-quarter to ₹985 crore in the April-June 2024 period.
JP Morgan assigned an underweight rating to Tata Technologies Ltd., for a target price of ₹800 per share. This target represents a 20% downside from the current market price of ₹994 per share.
Tata Technologies Limited’s revenue increased by 16% year-on-year, rising from ₹4,414 crore in FY22-23 to ₹5,117 crore in FY23-24. Net profit also saw a significant increase of 8.8%, growing from ₹624 crore to ₹679 crore during the same period.
In 2024, Tata Technologies derived a substantial portion of its revenue from India, which accounted for 36% of total sales. The UK contributed 24.2%, North America 20.4%, and the rest of the world 14.5%.
The top five clients of Tata Technologies, including Jaguar Land Rover, Tata Motors, and VinFast, contribute nearly 60.49% of the overall revenue. Over the past three years, the company’s net profits have grown at a compound annual growth rate (CAGR) of 42%, while sales have grown at a CAGR of 29%.
Tata Motors Ltd holds a 53.39% stake in Tata Elxsi, while Foreign Institutional Investors (FII) hold a 1.63% stake and Domestic Institutional Investors (DII) hold a 1.78% stake.
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Tata Elxsi Ltd
Tata Elxsi is a design specialist focused on software and digital engineering services. The company caters to the transport and automotive sectors. But it has a more diversified focus. It serves a variety of industries including automotive, broadcast and communications, consumer electronics, healthcare, and transportation.
Tata Elxsi, the 11th most valuable firm within the Tata Group, has a smaller equity base compared to other group companies such as Tata Consultancy Services (TCS), Tata Motors, and Tata Steel.
Since the beginning of the year, Tata Elxsi Ltd. shares have dropped by 20 percent, and they have fallen by 10 percent in the last six months.
As a mid-cap company, Tata Elxsi Ltd. has a market capitalization of Rs 43,164 crore. On Friday, its shares opened at Rs 6,940.25 per share, marking a 0.17 percent drop from the previous close.
Recently, JP Morgan rated Tata Elxsi Ltd. as underweight for a target price of ₹6,000 per share, indicating a potential downside of 13 percent from the current market price of ₹6,933 per share.
Additionally, Bernstein has assigned an ‘underperform’ rating to Tata Elxsi stock, with a target price of Rs 6,030 per share.
In the June quarter, Tata Elxsi reported a 3 percent decline in net profit, amounting to Rs 184 crore. The company’s EBITDA decreased by 3.6 percent to Rs 225 crore, down from Rs 233.7 crore, while the EBIT margin contracted by 105 basis points to 24.3 percent, compared to 25.8 percent in the previous quarter.
Revenue from operations grew by 9 percent in the June quarter, reaching Rs 926 crore, up from Rs 850 crore in the same quarter last fiscal year.
Tata Elxsi’s sales are primarily generated from various regions worldwide, with the United States contributing 42%, Europe 34%, India 17%, and the remaining portion coming from other global regions.
For the latest financial year, the company declared its highest-ever dividend per share (DPS) of ₹70, resulting in a total dividend payout of ₹436 crore. This accounts for more than half of its full-year net profit of ₹792 crore.
Tata Elxsi’s competitors include Coforge Ltd, Cyient Ltd, Happiest Minds Technologies Ltd, Intellect Design Arena Ltd, KPIT Technologies Ltd, and L&T Technology Services Ltd.
Tata Sons holds a 42.22% stake in Tata Elxsi, while Foreign Institutional Investors (FII) hold 13.67%, and Domestic Institutional Investors (DII) hold 6.24%.
Written by Omkar Chitnis
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