Not Tata Motors or Tata Power...This is the Top Performing Tata Group Stock of 2024

In a historic achievement, the Tata Group Stocks has secured its position as India's first conglomerate to surpass the significant milestone of Rs 30 trillion in market capitalization (mcap).

This historic feat positions the Tata Group at the forefront of India's corporate landscape, leading the way in market valuation.

Currently, the Mukesh Ambani-led Reliance Group claims the title of India's second-largest business entity, boasting a substantial market capitalization of Rs 21.6 trillion. Following closely is the Adani Group, steered by Gautam Adani, with a noteworthy market cap of Rs 15.5 trillion.

This remarkable achievement unfolded on Tuesday, 6 February 2024, driven by an exceptional 4% surge in the shares of Tata Consultancy Services (TCS).

This surge propelled TCS's market valuation beyond Rs 15 trillion for the first time, contributing significantly to the Tata Group's overall market capitalisation.

Continuing the trend of positive momentum within Tata Group stocks, another Tata stock garnered attention on 8 February 2024.

This spotlight-stealing stock is none other than TRF, which garnered attention after the cancellation of its merger with Tata Steel. Before delving into the intricacies, let's delve into a brief overview of TRF.

About TRF

TRF, formerly known as Tata-Robins-Fraser, was incorporated in 1962.

The company services core industries like power, mining, coal, fertilisers, ports, etc.

Since its inception, TRFL has specialised in manufacturing advanced systems for conveying, stacking, blending, reclaiming and processing of bulk raw materials. TRFL also undertakes turnkey contracts for total systems -- bulk material handling plants.

The company diversified to manufacture underground mining machinery - side discharge loaders and load haul dumpers and acquired the stamp-charging technology for coke-oven machinery in technical collaboration with German firms by the end of the 80s.

TRF shares have delivered returns of over 90% in the past 12 months.

Tata Steel Merger Plan Scraped

TRF has called off a merger with Tata Steel two days before a court-convened meeting of shareholders was scheduled to approve the scheme of amalgamation.

The board of TRF, where the promoter Tata Steel holds a 34.1% stake, on 6 February decided not to proceed with the merger.

In concurrence with the decision of TRF Limited, the Tata Steel board also decided to withdraw the scheme, which was announced on 22 September 2022, as part of the consolidation of nine group companies.

As a result, the meeting of TRF shareholders, as convened by the National Company Law Tribunal on Thursday, is now rendered infructuous.

The TRF stock jumped 20% after the announcement hit the market and remained locked in the upper circuit through the entire trading session.

According to the share swap formula prescribed before, TRF shareholders were to get 17 shares of TSL with a face value of Re 1 for every 10 shares of TRF having a face value of Rs 10.

Remote e-voting on the resolutions to support the amalgamation had started on 29 January, and it was to end on Wednesday. However, the board decided to call off the merger a day before the voting closure.

The board called off the merger in light of its business performance.

A Look at Financials

In the September 2023 quarter, the company faced a 26.7% year-on-year (YoY) decline in revenue, totalling Rs 392.7 million (m), down from Rs 536 m in the corresponding period of the prior year. Simultaneously, the net profit experienced a substantial YoY decrease of 65.6%, reaching Rs 183.3 m.

Looking at the financial year 2023, TRF disclosed a noteworthy 38.4% YoY increase in revenue, amounting to Rs 1.8 billion (bn). The net profit for the year stood at 875 m, a remarkable turnaround from the net loss of 161 m recorded a year earlier.

While over the past three years, TRF's revenue demonstrated robust growth, achieving a Compound Annual Growth Rate (CAGR) of 27.9%. The company achieved profitability in 2023, marking a significant recovery after two consecutive years of losses and indicating an enhanced financial standing.

Adding to this positive trend, the net margin trend also showcased an impressive transformation, transitioning from negative values to a positive net margin of 49.4% in the fiscal year ending March 2023.

This positive trajectory underscores the company's effective cost management and improved operational efficiency during this period.

TRF Financial Snapshot (2021-2023)

Particulars	31-Mar-21	31-Mar-22	31-Mar-23
Revenue (Rs in bn)	1.1	1.3	1.8
Revenue Growth (%)	-55.1	18.1	38.4
Net Profit (Rs in m)	-655	-161	875
Net Margin (%)	-57.5	-12.7	49.4

Data Source: Equitymaster

The company will be declaring its December quarter results on Monday, 12 February 2024.

What Next?

Looking ahead, TRF is committed to sustaining its positive financial performance by embarking on a trajectory of business expansion, emphasising operational efficiency, and contemplating strategic investments in technology.

The company envisions potential strategies, such as venturing into new markets or considering acquisitions of competitors, to fortify its position in the industry.

Rather than engaging in broad competition, TRF is inclined to specialise in specific sub-sectors exhibiting high growth potential. This approach involves offering tailored solutions and leveraging expertise to meet specific market demands.

Additionally, TRF is exploring opportunities for collaboration with complementary companies in relevant industries. This collaborative effort aims to extend the company's reach and expertise, fostering synergies and unlocking new market opportunities.

As part of its forward-looking strategy, the company aspires to uphold its profitability, with plans to systematically reduce administrative costs in the future.

Conclusion

Going forward, the company is set to benefit from the government's Production-Linked Incentive (PLI) scheme to bolster the engineering sector's growth and development.

The Make in India initiative seeks to attract foreign investment, foster innovation, and create employment opportunities in the manufacturing sector.

The engineering sector, with its diverse range of products and services, is well-positioned to contribute to this initiative.

The PLI scheme provides incentives to companies that manufacture specific products in India. This scheme is designed to encourage domestic production and reduce reliance on imports.

This influx of capital will enable companies to expand their production capacity, adopt new technologies, and develop innovative products.

The company also has ambitious plans to expand into specialised markets with limited competition and higher profit margins.

Although the Tata Group companies have always remained at the forefront of innovation and the India growth story, it does not mean Tata stocks aren't vulnerable to macroeconomic conditions.

You should treat them like any other company when considering them from an investment perspective.

Remember, a fundamentally strong company has the potential to give good returns in the long run. Hence, it is better to carry out proper due diligence before investing in any stocks, including Tata Group companies.

As you're interested in Tata group stocks, check out the new section in our Stock Screener, where you can view the fundamentals of companies within a business group in one screen, including the Top Tata group stocks.

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...