Why Tata Group Shares Continue to Rally?

The BSE Sensex delivered a total return of over 18% in the past one year. Investors have witnessed remarkable growth in different stocks across sectors.

For instance Trent and Titan have surged by an impressive 66% and 45%, respectively over the past year.

Titan's growth comes on the back of improved market share and a boost in demand for jewellery and watches.

On the other hand, Trent's business performance exceeded expectations, driven by its aggressive store expansion and effective utilisation of its digital presence.

Tata Motors achieved a remarkable 40% growth over the same period. This is due to the company's first quarterly profit in two years. This was on rising demand for passenger cars and medium and heavy commercial vehicles.

Meanwhile, Indian Hotels is up 73%, driven by higher utilisation levels. This consequently lead to higher net profits.

Tata Communications has also delivered a notable 40% return. This is led by the positive outlook expected over the long-term and the strong business performance in the past.

While these high-performing stocks hail from different industries, they all share one common trait. They are all from the world-renowned and trusted Indian business house, the Tata group.

The Tata group enjoys a proven track record of forging successful businesses across industries and over decades.

Be it in the IT industry, where it has nurtured blockbuster stocks like Tata Elxsi and the industry behemoth Tata Consultancy Services (TCS) or the retail sector, where it has cultivated distinguished brands such as Tata Consumer Products, Trent, and Titan, the group's ability to excel in across industries is evident.

Apart from these endeavours, the group's engagement with the telecommunications sector, has also yielded robust returns in the past few years. The group's Tata Communications and Tata Teleservices are up 68% and 64% in the past one year.

Another sector where the group has demonstrated its competency is the manufacturing sector, which houses the group's giants such as Voltas, Tata Steel, and Tata Consumer.

And the list doesn't end here. It goes on. To the extent that like clockwork, every five years, one or two Tata group companies emerge as high performers, delivering outsized returns to their shareholders.

The fact that these innumerable outperformers all come from the Tata Group only highlights the conglomerate's reputation for delivering consistent value to investors. But how has the business house managed to create so much shareholder wealth?

What is so special about the Tata group?

From investors to consumers, the Tata name is almost synonymous with trust.

This trust is built on a long history of consistently delivering quality products and services across its diverse portfolio of businesses. Even in the face of intense competition, the Tata Group has upheld strong ethical standards and transparency throughout its operations.

Moreover, the age-old Tata name carries a legacy that spans over a century. And this endurance has solidified the trust in the group. This trust serves as the base to deliver business value.

Two years ago, in September 2021, we conducted a poll consisting of 17 of the most popular corporate groups in India.

With an response from 5,274 participants, The Tata Group emerged as the undisputed winner, with a whopping 66.3% of the total votes. 16 out of 17 corporate groups such as Hero, Jindal, and RPG group received only up to 5% of the total votes each.

The immaculate reputation has helped the company attract not only consumers and investors but also some of the best talent. This talent has helped the business soar via strategic and profitable investments.

The Tata Group has been actively evolving with the changing times, innovating its business every step of the way.

It has been diversifying and investing strategically, expanding organically, and inorganically. While a majority of the group's international endeavours may not have been fruitful; its organic business growth has been remarkably successful.

These new investments in profitable sectors have allowed the group to tap into new markets and capitalise on synergies.

It has also enabled the group to build a business spanning salt to IT with reputable brands such as Tata Tea, Westside, Titan, Tata Motors, TCS etc.

Company Name	Market Cap (Rs. m)	Net Sales (Rs. m)	Net Profit (Rs. m)	Return on Equity (%)
Tata Consultancy Services Ltd.	1,19,19,177	16,03,410	3,81,870	50.80%
Titan Company Ltd.	26,36,503	2,72,100	21,800	25.80%
Tata Motors Ltd.	19,30,450	4,72,637	-17,392	-8.90%
Tata Steel Ltd.	13,92,024	12,90,214	3,30,112	30.20%
Tata Consumer Products Ltd.	7,98,950	79,323	8,858	7.70%
Tata Power Company Ltd.	7,16,715	1,11,079	32,508	33.80%
Trent Ltd.	6,04,311	38,807	2,496	9.50%
The Indian Hotels Company Ltd.	5,63,473	20,033	-345	-0.60%
Tata Elxsi Ltd.	4,85,348	24,708	5,497	37.20%
Tata Communications Ltd.	4,59,962	65,874	11,673	12.40%
Voltas Ltd.	2,60,654	70,986	5,835	11.10%
Tata Chemicals Ltd.	2,53,954	37,210	7,870	5.50%
Tata Teleservices (Maharashtra) Ltd.	1,43,101	10,938	-12,150	0.00%
Tejas Networks Ltd.	1,28,787	5,491	-637	-4.80%
Tata Investment Corporation Ltd.	1,23,807	2,532	2,014	1.20%
Tata Coffee Ltd.	46,170	8,169	1,018	9.00%
Rallis India Ltd.	37,853	26,039	1,643	10.00%
Tinplate Company Of India Ltd.	34,891	42,495	3,529	35.00%
Tata Steel Long Products Ltd.	30,641	68,016	6,299	21.70%
Tata Metaliks Ltd.	25,194	27,455	2,381	16.90%
Nelco Ltd.	17,078	1,432	102	12.70%
Oriental Hotels Ltd.	16,424	2,187	-134	-5.20%
Automobile Corporation of Goa	6,417	2,818	34	2.10%
Benares Hotels Ltd.	5,762	498	57	7.50%
Automotive Stampings and Assemblies	5,261	6,076	523	0.00%
Artson Engineering Ltd.	2,879	1,726	-50	-1648.50%
TRF Ltd.	1,894	1,271	-203	0.00%
Tayo Rolls Ltd.	819		-35	0.00%
Tata Technologies Ltd.		17,308	2,185	26.40%

Source: Equitymaster

The 155 year old conglomerate started the year 2,000 with a total revenue of US$ 8.9 bn (Rs 225 bn). The combined revenue of all Tata companies, for the financial year 2022, surged to US$ 128 bn (Rs 10.5 tn), all thanks to diversification and strategic investments.

Notably, Tata Consultancy and Tata Steel command a lion's share of the total revenue. TCS, in particular, enjoys a dominant position with a market capitalisation that is seven times larger than that of Titan, the second-largest company in terms of market capitalisation.

Moreover, unlike other business houses in the country, most of the Tata group's ventures are highly profitable and boast a pristine balance sheet. This allows the group to invest heavily if long term growth projects. It has also enabled the group to remain resilient through extreme economic environments.

But pioneering new projects and ventures successfully has always been the legacy of the Tatas.

The visionary founders of the Tata Group, Jamsetji Tata and Dorabji Tata, established the Tata Iron and Steel Company, also known as TISCO, in 1907. This milestone marked the birth of India's first iron and steel manufacturing plant.

TELCO (now Tata Motors) is credited for making India's first indigenously designed and manufactured car, Tata Indica and Tata Safari, India's first SUV.

The conglomerate is also attributed to the founding of India's first cosmetic brand, Lakme, which was subsequently sold to Hindustan Unilever.

In line with its tradition of innovation, the Tata group has been investing heavily in new-age sectors like renewable energy, electric vehicles, e-commerce, and digital platforms.

Tata Power has set up India's first EV charging station to help accelerate the energy transition. It has already installed nearly 15,000 home chargers and almost two thousand public chargers in over 160 cities and highways between cities.

It has also announced a massive investment of Rs 750 bn towards renewable energy. The money will be spent towards doubling the total capacity which will boost its renewable energy portfolio from 34% to 60% by 2027 and 80% by 2030.

The group's automotive arm, Tata Motors, is spearheading the EV revolution with more than 80% market share in passenger EV sales and Tata Motors will invest over US$ 2 bn in its electric vehicle (EV) business over the next five years.

Tata Electronics has officially announced its intention to establish an Outsourced Semiconductor Assembly and Test (OSAT) facility, a critical component in the semiconductor manufacturing process. Additionally, it plans to venture into advanced chip manufacturing within the coming years.

These strategic moves have set the group on the fast track to future growth, drumming up investor interest.

Conclusion

The Tata Group's long-standing presence, it's trusted brand image, and its commitment to excellence has made it a preferred choice among investors seeking stable and profitable investment opportunities.

Stock market movements are a function of multiple factors. While the group's prowess is well-proven, the rally in Tata Group shares is also subject to fluctuations based on changing market conditions, industry dynamics, and company-specific events.

Therefore, investors must tread with caution and conduct thorough research when making investment decisions.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...