Fundamental Analysis of Tata Investment Corporation: Did you know you can buy almost all Tata Group stocks for Rs 2,500? Don’t you believe us? There is a way. Tata Investment Corporation is a listed investment company of the Tata Group which has investments in various Tata Group and non-Tata Group listed and unlisted companies.

In this article, we’ll conduct a fundamental analysis of Tata Investment Corporation and try to know if it can be a good investment pick.

Fundamental Analysis of Tata Investment Corporation

We’ll initiate our study by learning about the business and structure of the company. Next, we take a bird’s eye view of the capital markets. Later, we’ll race through the financials of the stock. A section displaying the top holdings of the company and a summary conclude the article at the end.

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Company Overview

Tata Investment Corporation Ltd. (TICL) is one of the few oldest publicly listed investment companies in India. It was established by the Tata Group in 1937. Over the years its business changed from funding new business activities to operating as an investment company owning a portfolio of securities. 

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As of the present date, TICL is a non-deposit taking non-banking finance company (NBFC) engaged in the business of investing in equity and equity-related securities for long-term value creation.

Income from dividends, interest on debt instruments, and gains (realized and unrealized) from the change in value securities make up the revenue for the company.

TICL has a diversified portfolio with investments in various companies from different sectors such as banking, cement, chemicals &  fertilizers, hotels, steel, e-commerce, information technology, and more.

The promoter Tata Group holds a majority of 73.4% stake in the investment company making it a subsidiary of the salt-to-software conglomerate. 

Along with its investments in shares and debentures of various firms, TICL also has a subsidiary: Simto Investment Co. Ltd. In addition to this, it is a co-promoter of the Tata Asset Management Pvt. Co. Ltd, the fund management company of the Tata Group.

We got a good understanding of the business of TICL. We’ll now briefly discuss the Indian capital markets in the next section of our fundamental analysis of Tata Investment Corporation.

Industry Overview

Financial markets worldwide as well as in India experienced sharp movements in the last three years brought forward by the Covid-19 led-pandemic, the breakdown of global supply chains, Russia’s invasion of Ukraine, the energy crisis, the slowdown in the developed nations and more. 

Furthermore, Indian financial markets were impacted by volatility arising from accusations of fraud and price manipulation on the Adani Group by Hindenburg Research, a US-based short-seller. 

Despite these macroeconomic troubles, Indian companies and financial markets continued their upward trajectory. The government’s robust foreign policies, mass vaccination, and well-implemented food grain distribution helped to maintain stability in the nation’s financial ecosystem.

The chart below from the data by Bloomberg Company Analysis showcases noteworthy resilience displayed by the domestic stock market.

Fundamental Analysis of Tata Investment Corporation - Annual Report
Source: Tata Investment Corporation Ltd. Annual Report FY 2022-23

Going forward, the management of Tata Investment Corporation is positive about Indian market indices achieving growth in double digits. This shall bode well for the Indian investors as well as investment companies like TICL as NIFTY 50 5-yr CAGR returns stand at 11%.

Tata Investment Corporation – Financials

Revenue and Net Profit Growth

The income and net profit of TICL grew at a CAGR of 9.38% and 13.47% over the past five fiscals to Rs 277 crore and Rs 252 crore in FY23. Dividend income (Rs 174 crore), interest income (Rs 38 crore) and net gain on fair value changes (Rs 66 crore) made up the total operating revenue of the recent fiscal respectively.

The table below showcases the revenue and net profit growth of Tata Investment Corporation for the last five financial years.

Fiscal YearOperating RevenueNet Profit
2023277252
2022254214
2021163155
202014490
2019177134
5-Yr CAGR9.38%13.47%
(figures in Rs Cr except for CAGR)

Profit Margin and Return on Equity

Being an investment company, TICL has high-profit margins. It clocked a profit after tax (PAT) margin of 91% for the financial year ended FY 2022-23. However, its return on equity (RoE) is abysmally low. 

For the last several years, the stock has delivered a low RoE signalling at the high reserves or investments it has. Its income from dividends, interest and gains from investments are not enough to deliver good RoE for investors.

The figures below represent the PAT margin and RoE of TICL for the past few years.

Fiscal YearPAT MarginRoE
2023911.28
2022851.08
2021951.08
2020631.12
2019761.68
(figures in %)

Note: We have omitted a study of operating profit margin and return on capital employed because these ratios do not provide significant insights as TICL is a debt-free investment company. 

Debt Analysis

We’ll keep our leverage analysis brief as TICL is a debt-free stock. The management has maintained a nil debt-to-equity ratio for a long time. It mainly funds its purchases of securities from internal accruals and reserves.

Top Holdings of Tata Investment Corporation

The worth of any investment or holding company can be assessed by valuing its investments. For our fundamental analysis of Tata Investment Corporation, we’ll look at the top holdings in the portfolio of the company. 

The table below presents the fair value of the top ten holdings of Tata Investment Corporation as of 31-03-2023.

Company NameFair Value (Cr)
Titan Company₹4,496
Tata Consumer Products₹3,144
Trent₹2,091
Tata Chemicals₹1,478
Tata Capital₹1,055
Voltas₹815
Tata Elxsi₹628
IHCL₹579
Tata Motors₹463
Tata Steel₹439

We can learn from the table above that majority of TICL’s funds are directed towards growth stocks such as Titan, Tata Consumer Products, Trent, etc. 

Fundamental Analysis of Tata Investment Corporation – Key Metrics

We are almost at the end of our fundamental analysis of Tata Investment Corporation. Let us take a quick look at the key metrics of the stock.

CMP₹2,312Market Cap (Cr.)₹11,720
EPS₹49.8Stock P/E49
RoE1.28%Dividend Yield2.0%
Promoter Holding73%Book Value₹3,868
Net Profit Margin91%Debt to Equity0.01

Conclusion

As we conclude our fundamental analysis of Tata Investment Corporation, we can say that its portfolio has the best stocks of the Tata Group will higher allocation towards the ones favoured by Dalal Street. At the same time, with the Tata Group exercising the company’s operations, it may favour Tata Stocks over industry peers. 

Overall, TICL has demonstrated steady earnings growth in line with the broader index. Do you think with stocks such as Trent, Tata Consumer Products and Titan in its portfolio, investors can expect higher income for TICL in future? What are your thoughts on the stock? How about we continue this conversation in the comments section below?

Written By – Vikalp Mishra

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