Tata Group Now Relies On TCS More Than Ever
Tata Group’s market capitalisation crossed the record Rs 10 lakh crore in 2018. Yet, of its 28 companies, shares of only eight rose last year—the fewest since 2011.
The least broad-based group rally in seven years was expectedly dominated by Tata Consultancy Services Ltd., India’s largest software services provider and the biggest Tata company. The combined market cap of India’s largest conglomerate rose by close to Rs 82,200 crore in the just-concluded year.
Excluding TCS, Tata Group’s value dropped Rs 1.12 lakh crore. The reliance on the information technology company is at its highest ever—TCS is twice as valued compared with the combined market capitalisation of the remaining 27.
Other than TCS, the group companies whose shares returned gains in 2018 include Titan Company Ltd., Indian Hotels Company Ltd., Trent Ltd., NELCO Ltd., Tata Elxsi Ltd., Benares Hotels Ltd. and Oriental Hotels Ltd. The group’s other major entities like Tata Motors Ltd., Tata Steel Ltd. and Tata Global Beverages Ltd. tumbled, allowing the HDFC Group to briefly become India’s largest conglomerate last week.
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Revenue grew at a higher rate than its nearest peer, share of digital services improved to 28 percent.
Revenue growth and rupee depreciation helped the software exporter’s operating margin expand to 26.5 percent.
Four dividends, bonus issue and buyback drove the rally in its shares.
Shares of India’s largest branded jewellery maker tumbled about 20 percent from its peak at the start of the year because of volatile gold prices and concerns around a possible hike in import duty.
No change in the duty and a pick-up in demand lifted investor sentiment, and the company is optimistic.
Titan’s sales rose 29 percent in the 40-day festive period, while revenue and profit also rose for its watches segment.
Favourable demand-supply dynamics and improving occupancy rate gave India’s second-largest hotel chain operator pricing power.
The demand for hotel rooms grew 4-6 percent against a supply growth of 3 percent in the last one year.
The international segment revived, and domestic food and beverage businesses aided financials.
Strong quarterly performance, store expansion and improving retail sector outlook aided the rally in the share prices of retail chain operator.
Cost cuts helped improve profit and margin.
Westside reported a revenue and same-store sales growth of 14 percent and 6 percent, respectively, in the first half.
Higher pace of store addition is expected to aid growth.
Selling loss-making businesses, increasing opportunities in satellite communications and a multi-fold jump in net profit led to a surge in its shares.
Demand for its very small aperture terminal or satellite communications system increased because of the government’s mandate to connect oil retail outlets by March 2019 and its thrust on connectivity of other services and governance.
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Headwinds faced by Jaguar Land Rover hurt investor confidence. Sales of the luxury car unit, which contributes close to 80 percent of Tata Motors’ revenue, remained flat due to uncertainty in Europe over diesel vehicles, Brexit and weaker demand in China.
Tata Motors reported its worst loss in nine years.
S&P Global Ratings cut Tata Motors’ long-term rating twice in 2018 citing weaker than expected profitability.
Falling steel prices because of excess supply and rising raw material cost led to lower product spreads—the difference between the cost and selling price—impacting the margin of steelmakers.
A trade war, no clarity on completion of European joint venture with Germany’s Thyssenkrupp AG and rise in debt due to Bhushan Steel Ltd.’s acquisition weighed on investor confidence.
Tata Global Beverages
Output fell in its tea and coffee plantations. International business was impacted due to declining black tea market.
Lower data volume and falling data tariff hurt Tata Communications’ revenue. That hurt its profits in the last four quarters.
Delayed demerger and listing of Hemisphere Properties India Ltd.—holding company for surplus land—also weighed on the stock price.
Tata Power has been bleeding for quite some time because of its Mundra project as it was not allowed to pass on the higher cost of imported coal.
The Supreme Court, however, in October asked the regulator to alter power purchase agreements to reflect the higher costs.
Rupee depreciation resulted in mark-to-market losses on foreign currency borrowings.
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