Tata Group Small Cap Stocks: The Tata Group is India’s one of India’s oldest and biggest business conglomerates. This multinational, multi-industry company was founded by Jamshedji Tata in 1868 as a private trading firm.
Often called the salt to software conglomerate, it touches the lives of almost all people in India in some or the other way. It has a market presence in 175 countries around the world!
The Tata Group employs more than 7,50,000 people all over the world. That’s more than Google, Microsoft, Toyota, and Coca-Cola combined!
Most of us are aware of the group’s large-cap companies. In this article, we shall get to know more about some of its small-cap companies.
But, wait.
What Are Small Cap Companies?
In the Indian context, small-cap companies are those that have a market capitalization of fewer than ₹5,000 crores. Market capitalization is simply the total number of shares of a company multiplied by its present share price.
Small-cap companies are smaller in size, are niche businesses, and have huge growth potential. Usually, these are the ones that become multibaggers. However, the risk-return trade-off is high in these companies.
What Are the Pros and Cons of Investing in Small Cap Stocks?
Many investors add small-cap stocks to their portfolios. Here are a few pros and cons of investing in them:
On the bright side, small-cap stocks have more growth opportunities than larger companies, are a gateway to invest in niche growth stories, involve a low-cost investment, and tend to give really high returns when they do well.
On the ugly side, their share prices are volatile, are sustainable mainly for long-term investors, tend to be illiquid, are more prone to risk as compared to their counterparts, and require more time and research as an investment avenue.
Tata Group Small Cap Stocks
Let’s take a look at a few small Cap stocks from the Tata Group:
Tata Group Small Cap Stocks #1 – Tata Coffee Limited
Tracing its roots to 1992, Tata Coffee Limited is one of the largest integrated coffee cultivation and processing companies in the world.
They produce some of the finest Indian-origin green coffee beans, instant coffee, tea, and pepper. They have 19 estates, 8000 hectares in area, in the lush Western Ghats.
This small-cap company from the Tata group is the foremost producer of specialty coffee and the second-largest exporter of instant coffee in India.
It is Asia’s largest integrated coffee company. Tata Coffee Grand, Eight-o-Clock, and Sonnet are some of its brands.
Currently, the USA accounts for 57% of its revenue, India accounts for 15%, CIS countries 6%, and the remaining 22% comes from the rest of the world.
| Particulars | Values |
|---|---|
| Face Value (₹) | 1 |
| EPS (₹) | 9.38 |
| Debt to Equity | 0.49 |
| ROE (%) | 9.75 |
| Current Ratio | 1.14 |
| Market Cap (₹ in Cr) | 3,645 |
| Promoter’s Holdings (%) | 57.48 |
| Dividend Yield (%) | 0.77 |
| Stock P/E (TTM) | 20.79 |
| Net Profit Margin | 9.38 |
Pros
- The company’s PE ratio is lower than the industry PE.
- Its debt to equity ratio is ideal.
- It has a good current ratio of 1.14.
- Its promoter’s holdings are stable at 57.48% for the last 4 quarters.
- It does not have pledged shares.
Cons
- Its quick ratio is lower than 1 which reflects lower solvency in the short term.
- It has had weak net profit growth for the last three years with an average of 7.82%.
- Its average ROE for the last three years is 12.33%
Tata Group Small Cap Stocks #2 – NELCO Limited
It was established in 1940 and is another notable small-cap stock from the Tata Group. Nelco Limited is engaged in the business of network systems, automation, and industrial controls.
It specializes in the areas of security and surveillance for defence and civil applications, electronics for locomotives, traction, real-time and embedded software and network management system with VSAT based networks, AC and DC drives, and turnkey projects.
Some of the notable clients of the company include the Ministry of Defence, State Electricity Boards, Tata Iron, and Steel Company, Power Grid Corporation of India, Indian Railways, Siemens, and Steel Authority of India.
It has proven expertise in customization, end-to-end management, consulting, system integration, as well as robust infrastructure and processes.
| Particulars | Values |
|---|---|
| Face Value (₹) | 10 |
| EPS (₹) | 7.68 |
| Debt to Equity | 0.69 |
| ROE (%) | 16.31 |
| Current Ratio | 0.75 |
| Market Cap (₹ in Cr) | 1,481 |
| Promoter’s Holdings (%) | 50.09 |
| Dividend Yield (%) | 0.19 |
| Stock P/E (TTM) | 84.05 |
| Net Profit Margin | 5.47 |
Pros
- It has a good average ROE for the last three years, at 30.21%
- It has an ideal debt to equity ratio.
- Its promoters holdings are good at 50.09%
- It does not have pledged shares.
Cons
- Its PE ratio is higher than the industry average.
- Its current assets are lower than its current liabilities, as indicated by its current ratio.
- Its quick ratio is unfavourable indicating lower short term solvency.
- Its average net profit growth for the last three years is weak at 0.68%.
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Tata Group Small Cap Stocks #3 – Tata Metaliks Limited
Tata Metaliks is another small-cap stock from the Tata Group. It is one of India’s leading producers of ductile iron (DI) pipes and high-quality pig iron (PI).
The company produces raw materials for different types of casting applications used in various industries like power, railways, agriculture, and automotive.
As far as Pig Iron is concerned, its market share is 20% and it is the second-largest player in the industry.
It has its state-of-the-art manufacturing plant in Kharagpur, West Bengal, India which has an annual hot metal production capacity of 5,00,000 tonnes.
| Particulars | Values |
|---|---|
| Face Value (₹) | 10 |
| EPS (₹) | 82.33 |
| Debt to Equity | 0.01 |
| ROE (%) | 16.90 |
| Current Ratio | 2.32 |
| Market Cap (₹ in Cr) | 2,279 |
| Promoter’s Holdings (%) | 60.03 |
| Dividend Yield (%) | 0.55 |
| Stock P/E (TTM) | 8.76 |
| Net Profit Margin | 11.47 |
Pros
- It has a good average ROE for the last three years, at 25.14%.
- It has a low debt to equity ratio of 0.01.
- It has a good current ratio of 2.32.
- Its promoters holdings are high at 60.03%
- It does not have pledged shares.
Cons
- Its PE ratio is higher than the industry average.
- It has had weak revenue growth for the last three years with an average of 0.76%.
- It has had weak net profit growth for the last three years with an average of 11.36%
Tata Group Small Cap Stocks #4 – Tata Steel Long Products Limited
Tata Steel Long Products Limited was formerly known as Tata Sponge Iron Limited. This small-cap stock from the Tata Group is engaged in manufacturing high alloy steel primarily for the wire rope industry and for the auto sector.
Its special steel is used in other industries like construction and capital goods as well. Sponge Iron produced by the company is used as a raw material in electric arc furnaces or induction furnaces.
Its market share for these products is growing by the day. It owns and operates a steel plant in Jamshedpur (Jharkhand) and a sponge Iron Plant in Keonjhar (Odisha).
Its operations are vertically integrated with both upstream and downstream facilities.
It enriched its product portfolio by adding 50 new products during FY21. With its acquisition of Usha Martin Ltd., it entered into the specialty steel sector.
Recently it prepaid 1325 crores of gross debt in FY21 thereby clearing long-term loans and saving interest costs by 20%.
| Particulars | Values |
|---|---|
| Face Value (₹) | 10 |
| EPS (₹) | 201.80 |
| Debt to Equity | 0.55 |
| ROE (%) | 22.05 |
| Current Ratio | 0.82 |
| Market Cap (₹ in Cr) | 3,000 |
| Promoter’s Holdings (%) | 74.91 |
| Dividend Yield (%) | 0.75 |
| Stock P/E (TTM) | 3.29 |
| Net Profit Margin | 12.04 |
Pros
- The company’s PE is lower than the average industry PE.
- It has an ideal debt to equity ratio.
- It has had a good revenue growth for the last three years with an average of 81.06%.
- Its net profit margin is higher than historical 3 years NPM Margin.
- It has had a good net profit growth for the last three years with an average of 59.53%
- Its promoters holdings are high at 74.91%
- It does not have pledged shares.
Cons
- Its average ROE for the last 3 years is 1.18%.
- Its current ratio is low, indicating that it has fewer assets as compared to its liabilities.
- Its quick ratio is lower than 1 which reflects lower short term solvency.
Tata Group Small Cap Stocks #5 – Rallis India Limited
Rallis India is presently a Tata Enterprise and a subsidiary of Tata Chemicals. It has a business presence in the farm essentials vertical is one of India’s leading crop care companies.
Rallis has been the sole distributor of TCL urea since the early 90’s when Tata Chemicals’ fertilizer manufacturing plant was set up. It has a history of 150 years and it is also in the business of contract manufacturing for global corporations.
Its crop protection and plant growth nutrients have a market share of 6%, and seeds have a market share of 3% in the domestic market. 84% of its revenue comes from the crop care segment while 16% comes from the seeds segment.
It has a very strong dealer network and reaches 80% of districts in India and provides agricultural solutions to more than 5 million farmers.
It has planned a capital expenditure of ₹ 800 crores for the next five years and it will largely be funded from internal accruals.
This expenditure will enhance capacities for formulations and new active ingredients and achieve backward integration. It is focused on increasing its footprint in America, Africa, Europe, and the Asia Pacific.
| Particulars | Values |
|---|---|
| Face Value (₹) | 1 |
| EPS (₹) | 9.59 |
| Debt to Equity | 0.02 |
| ROE (%) | 14.36 |
| Current Ratio | 1.81 |
| Market Cap (₹ in Cr) | 4,519 |
| Promoter’s Holdings (%) | 50.09 |
| Dividend Yield (%) | 1.29 |
| Stock P/E (TTM) | 24.23 |
| Net Profit Margin | 9.41 |
Pros
- The company’s PE ratio is lower than the industry average.
- It has a low debt to equity ratio of 0.03.
- It has a good current ratio of 1.81.
- Its promoter’s holdings are good at 50.09%
- It does not have pledged shares.
Cons
- Its average ROE for the last three years is 13.79%
- It has a quick ratio of lower than 1 which reflects lower solvency in the short term.
- It has had a weak revenue growth for the last three years, at 10.7%.
- It has had a weak net profit growth for the last three years, at 10.89%
In Closing
In this article, we took a look at a few small-cap stocks from the Tata Group. Investors who are aggressive, seek higher returns, and have a high-risk appetite for their investments usually invest in small-cap stocks.
The risk involved in investing in small-cap stocks can be diversified by portfolio diversification. Investors have to spend a lot of time doing thorough research on these stocks as their prices can be volatile and they can be nearly illiquid.
That concludes our post on Tata Group Small Cap Stocks. Please share your thoughts in the comments section below.
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Hey, there! Thank you for stopping by 🙂 Simran is a master graduate in commerce from Bangalore University, an NSE-certified Fundamental Analyst and a NISM-certified Research Analyst. She finds interest in investing and personal finance. Outside of work, you can find her painting, reading and going on long walks.
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