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  • Mar 7, 2024 - Top Murugappa Group Stocks Making Big Moves in 2024. Here's How You Can Profit...

Top Murugappa Group Stocks Making Big Moves in 2024. Here's How You Can Profit...

Mar 7, 2024

Top Murugappa Group Stocks Making Big Moves in 2024. Heres How You Can Profit...

Be it Tatas, Ambani, or the Adani group - most Indian conglomerates have tentacles reaching into many industries. These behemoths play a pivotal role in shaping India's economic landscape.

Renowned for their commitment to R&D, these conglomerates drive innovation across sectors while contributing significantly to employment and social welfare.

Last year, we covered two detailed editorials explaining how you can profit from the TVS Group and M&M Group's big moves. Most stocks from both these groups are trading near record-high levels.

This time, we're back with an under-the-radar business group making significant moves to benefit in 2024 and beyond.

Tracing its origins back to Burma in 1900, this business group underwent a transformative shift when it relocated to India in 1930.

Today boasting a turnover of Rs 732 billion (bn), employing over 73,000 individuals, and a diverse portfolio spanning 28 businesses across multiple sectors, this group is now steered by fourth and fifth-generation leaders.

Among its esteemed brands are Hercules, BSA, Mach City, Ajax, Chola, and Gromo, each a testament to the group's enduring legacy and commitment to excellence.

If you've not guessed it already - we're talking about the Murugappa group.

Murugappa Group Stocks - Expansions and Acquisitions

Ranked 25th among India's wealthiest families, the Murugappa family has grown by acquiring and expanding new sectors and opportunities.

Here are some significant expansion initiatives the group has witnessed in recent years:

  • The acquisition of Tube Investments of India Limited in 2020 was a significant move for the group, consolidating the group’s presence in the engineering sector.
  • In 2021-22, Cholamandalam Investment and Finance Company Limited acquired 71.94% of Payswiff.
  • In March 2023, Tube Investments of India and Premji Invest acquired Lotus Surgicals Pvt Ltd for Rs 3.48 billion (bn), of which TII invested Rs 23.3 million (m) and received 67% of the stake. With this move, the focus was to create a medtech platform.
  • CG Power and Industrial Solutions (CGPISL), another part of the conglomerate, invested US$ 791 m into semiconductor assembly and testing. This is to establish an outsourced semiconductor assembly and testing (OSAT) facility in India. This move is a deliberate expansion strategy to diversify potential growth avenues within the technology sector.

With plans for a series of product launches in the upcoming months, including three-wheeler cargo vehicles, tractors, rickshaws, and four variants of electric heavy commercial vehicles (HCV), the group is poised to make significant strides in the automotive sector as well.

TI Clean Mobility Private Ltd (TICMPL), a group subsidiary, is leading the charge in the electric vehicle (EV) sector.

With a strong presence in states like Bihar, Uttar Pradesh, Tripura, Assam, Jammu Kashmir, and Kerala, TICMPL is well-positioned to take advantage of the increasing demand for EVs in India.

Exploring the Top Murugappa Group Stocks

Amid the group's expansion and innovative endeavours, its listed companies have shown impressive performance in the financial markets.

Here is a quick overview of the listed Murugappa group stocks:

Carborundum Universal Abrasives, electron-minerals, and ceramics
Cholamandalam Financial Holdings Finance
Cholamandalam Investment and Finance Company Loans and financial services
Coromandel Investment Ltd Fertilisers, specialty chemicals and crop protection chemicals
EID Parry India Ethanol, Sugar manufacture and export, nutraceuticals
Shanthi Gears Gearboxes and foundry
Tube Investments India Tubes and industrial chains, EV
Wendt India Super abrasive, grinding, and precision products
CG Power Power generation, semiconductors, industrial motors, and locomotive solutions

Let's dive into the top-performing Murugappa group stocks in detail.

#1 Carborundum Universal Ltd

Carborundum Universal reigns supreme in India's abrasives market, specialising in sandpaper and grinding wheels.

With over a century of experience, they supply abrasives and electro-minerals to different industries, establishing themselves as leaders in grinding and cutting solutions.

For the quarter ended December 2023, Carborundum Universal reported a consolidated net profit of Rs 1.1 bn, compared to Rs 1.3 bn last year. The board also declared an interim dividend of Rs 1.50 per share on the Re 1 face value of each share.

Despite the improvement in operating performance, higher tax outgo resulted in a dip in net profit for the December 2023 quarter.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 26,646 33,656 47,322
Operating Profit Margin 17.1 16.1   
Net Profit 523 1,069 1,017
Net Profit Margin 11.1 10.5 9.5
Data Source: Equitymaster

Over the last year, the share price of Carborundum Universal has gone up by 10.7%. The current market cap is Rs 206,455.4 million (m).

The average ROE of the company over the last 5 years stands at a decent 13%, but it is less than the sector average of 17%.

When customer inventory correction stabilises, the company expects its ceramics segment to stabilise with 20% growth.

Carborundum is keen on exploring building solutions with advanced materials to diversify from traditional materials, chemicals, and abrasives.

In the past two years, the company has delved deeper into the Aerospace and Defense sector. Their ceramic material is used in building body and vehicle armour. All the materials needed for this are completely made in India.

The company partnered with ideaForge Technology, a private-sector drone maker, to develop nanomaterial-reinforced parts for drones. This partnership will enable the company to meet its commitments for manufacturing ceramic ra domes for aerospace and missile systems with a License Agreement for Transfer of Technology (LAToT) with DRDO.

In the automotive sector, Carborundum Universal supplies abrasives to major players from Kia to Royal Enfield. They also make blast-proof protection products for electric vehicles.

The company is well-positioned to manufacture several cutting-edge components using advanced materials with technical and advisory support from DRDO.

#2 Cholamandalam Financial Holdings

Cholamandalam Financial Holdings is a financial powerhouse in India.

For over 70 years, they've offered various financial services, including investment and finance, general insurance, and healthcare financing.

The consolidated December 2023 quarterly profit of Cholamandalam Financial Holdings increased 43% YoY to Rs 10.3 bn.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 139,650 148,267 183,912
Operating Profit Margin 51 50.1 52.5
Net Profit 17,639 22,422 28,183
Net Profit Margin 12.7 15.3 15.5
Data Source: Equitymaster

The company recorded growth in all channels, including its sister company. The Insurance Express outlets experienced a growth of 21%, along with 27% from other channels.

To settle legal disputes, promoter Ambadi Enterprises sold their entire stake through open market transactions. The bulk deal involved close to 1.1 million shares at Rs 1,151 per share.

The company has recently diversified into crop insurance in 4 districts of Maharashtra.

While it continues to focus on motor portfolio correction, there are improvements in cars, OEM, and other channels.

#3 Cholamandalam Investment and Finance Company Ltd.

Cholamandalam Investment and Finance Company Ltd. (Chola) is the financial muscle of the Murugappa Group.

Founded in 1978, Chola has become India's prominent financial services provider . They offer vehicle, home, and personal loans, catering to a wide range of customer needs nationwide.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue   34,081 50,548
Operating Profit Margin      
Net Profit 15,209 21,535 26,649
Net Profit Margin 15.9 21.2 20.7
Data Source: Equitymaster

The company's vehicle finance stream is well diversified extending to 1,254 pan-India branches, financing new and used vehicles in commercial, passenger, two-wheelers, and tractor sectors.

The company further diversified into new businesses in the Consumer and Small Enterprises Loans ( CSEL), Secured Business Personal Loans (SBPL), and SME sectors.

Over the past year, the company's share price has gone up by 46.5%.

To sustain profit in the home loans sector, Chola is planning on low-cost expansion and process optimisation.

#4 Coromandel International Ltd

Coromandel International is a significant player in India's rural development. They provide integrated solutions for farmers, offering fertilisers, crop protection products, seeds, and advisory services.

Established in 1967, they're a one-stop shop for farmers looking to boost their yields and agricultural success.

Coromandel International reported a loss of 57% in the December 2023 quarter compared to the previous quarter.

In recent months, the below-normal monsoon and lower crop sowings have affected the yield of the entire agricultural sector.

The industry performance was further limited by increasing raw material prices and lower Nutrient Based Subsidy (NBS ) rates for the Rabi season.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 142,570 192,551 297,990
Operating Profit Margin 14 11.3 9.8
Net Profit 13,292 15,285 20,129
Net Profit Margin 9.4 8 6.8
Data Source: Equitymaster

The Nutrient and Allied businesses of Coromandel improved their market share in the quarter even though the sales volume declined. The crop protection business also showed a 21% volume growth, owing to domestic markets and export performance.

#5 EID Parry India Ltd

E.I.D. Parry (India) Ltd. boasts a 230+ year legacy. They're a leader in sugar production and hold the distinction of being India's first.

Beyond sugar, they're pioneers in nutraceuticals, offering organic spirulina.

In its latest quarter earnings, the company posted lower revenues as the government put out restrictions on export volumes. Even though there is an increase in domestic volume and realisation, the prevailing climatic conditions pose serious challenges.

Cane crushed for this quarter came in less than what it was a year ago, but the distillery profitability was better due to the domestic volumes.

As monsoons were less than expected in Maharashtra and Karnataka, the sugar producer registered a 7.6% reduction in sugar production in the December 2023 quarter.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 187,309 237,742 354,575
Operating Profit Margin 10.6 10 8.6
Net Profit 9,998 15,737 18,277
Net Profit Margin 5.4 6.7 5.2
Data Source: Equitymaster

The expansion benefits have not corresponded to financial results because of changes in government policy related to heavy ethanol.

To move in a growth trajectory, E.I.D Parry plans to diversify to multiple verticals such as sugar, bioenergy, food, and nutrition. This delinking will help the company overcome the sugar industry's tightly controlled and cyclical aspects .

#6 Shanthi Gears Ltd

Shanthi Gears Ltd. is a renowned manufacturer of high-precision gears and gearboxes in India. For over four decades, they've catered to diverse industries, supplying crucial components for the smooth operation of machinery.

They're known for their commitment to quality and a focus on cutting-edge gear solutions.

Internal restructuring was critical to the growth of Shanthi Gears. In 2023, the company made a record-breaking revenue of Rs 4 bn, which was 54% growth from the previous year.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 2,246 3,461 4,569
Operating Profit Margin 12.1 17.9 20.2
Net Profit 202 425 671
Net Profit Margin 9.4 12.6 15
Data Source: Equitymaster

Over the past year, Shanti Gears share price has gained 53.9% with 25% gain in the last 30 days.

The rising material costs and global trade disruptions are expected to slow down the industrial sector growth. The industry is expected to grow only 5% from 2023 to 2027.

Supported by the government's PLI scheme to improve manufacturing in India, Shanthi Gears is all set to meet its target revenue in 2024.

#7 Tube Investments India Ltd

Tube Investments of India Ltd (TIL) is a diversified engineering giant. Their crown jewels include India's iconic TI Cycles brand and leadership in precision tubes.

They also manufacture bicycles, metal components, and industrial chains, making them a one-stop shop for engineered solutions.

In October 2022, the company announced its plans to establish a Rs 2 bn greenfield precision steel tube manufacturing facility.

It also invested Rs 2.5 bn in its subsidiary TICMPL to diversify into the electric vehicles sector.

India's first electric tractor Cellestial - e-tractor, was manufactured by Tube Investments of India. In July 2023, TICMPL entered into an agreement to pursue e-SCV business and incorporated another subsidiary, TIVOLT.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 61,514 125,519 151,080
Operating Profit Margin 9.8 11.8 12.6
Net Profit 2,857 9,676 11,584
Net Profit Margin 4.7 7.8 7.7
Data Source: Equitymaster

In the competitive business world, Tube Investments can improve its revenue as more announcements of converting 40K wagons to Vane Bharat standard are made.

Diversified revenue streams, strong growth in its core business, and a ramp-up in CG Power are expected to contribute to the overall growth of Tube Investments.

#8 Wendt (India) Ltd

Wendt (India) Ltd specialises in grinding technology solutions. They're known for their diverse product portfolio, focus on innovation, and personalised technical services.

Wendt recently announced that it will pay a dividend of Rs 30 per share.

Here is a financial snapshot of the company:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 1,408 1,829 2,154
Operating Profit Margin % 16.5 23.5 26.9
Net Profit 170 369 530
Net Profit Margin % 9.3 15.1 19.1
Data Source: Equitymaster

For the September 2023 quarter, company reported standalone profit of Rs 170 m against Rs 162.2 m during the same period last year.

However, in 2023, Wendt India stock was one of the top performers of the Murugappa group, earning returns of 80%. Also, in October, the stock reached the Rs 15,000 mark for the first time, becoming one of the most expensive stocks in India.

#9 CG Power

CG Power, formerly Crompton Greaves, established in 1937, has products and solutions catering to power generation, transmission, and distribution.

Following the acquisition by Murugappa Group's Tube Investments India in 2020, the stock has gained 1,268% in three years.

The debt-ridden company gained supremacy in the power and industrial sector with tight management control of the Murugappa group.

The PM approved the JV of CG Power (92.3%) Renesas Electronics Corporation, and Stars Microelectronics to establish a semiconductor manufacturing unit in Sanand, Gujarat, for Rs 76 bn. The products will cater to industrial, automotive, and power applications.

Post approval for JV for the semiconductor manufacturing facility, the share price CG Power soared 12%.

Here is an overview of financial performance:

Financial Snapshot

Particulars (Rs m) FY21 FY22 FY23
Total Revenue 30,754 55,211 70,403
Operating Profit Margin 16.5 23.5 26.9
Net Profit 12,795 6,296 7,963
Net Profit Margin % 43.2 11.5 11.4
Data Source: Equitymaster

The December 2023 quarter performance report showed 25% YoY growth in profit.

The weak demand for motors resulted in a price war, but CG Power tackled it to increase market share, despite a drop in margins.

The new facility is expected to ramp up production to 15 million units per day. Reportedly, it could contribute Rs 3 bn to the CG Power topline at an average selling price of US$ 0.6 per chip.

CG's entry into the semiconductor industry is a strategic diversification as JV partners will extend innovation support .

In Conclusion

The growing popularity of the government's PLI scheme has resulted in growing partnerships to explore the semiconductor sector.

In February 2022, Vedanta partnered with Foxconn for a semiconductor joint venture. However, Foxconn withdrew after 16 months, leaving Vedanta without another partner. After 16 months, Foxconn backed out, and Vedanta has not allied with another partner yet.

The key to finding success in the semiconductor manufacturing space is finding the right partner to implement the latest technologies.

Recently, Prime Minister Narendra Modi approved the JV under India's semiconductor scheme, allowing the Murugappa group to invest Rs 7.6 bn over five years through a mix of subsidies.

CG Power and Industrial Services of Murugappa group will own 92.3% of the JV, partnering with Renesas (6.8%) and Stars Microelectronics (0.9%) to explore the semiconductor manufacturing sector.

Through companies like Parry Murray and associates, the Murugappa group has a strong presence in the electronics sector. Increased domestic chip production can lead to reliable and cost-effective sources of electronic components.

Additionally, through Coromandel International, the group has material sciences expertise to aid in advanced chip production.

Murugappa Group's foray into the semiconductor sector is a major driving point for future success. The JV with Japanese chipmaker Renesas Electronics Corporation and Star Microelectronics of Thailand for building OSAT is expected to increase the capacity to 15 m units.

The construction is expected to begin in the next 100 days with 50% capex subsidies from the Union Government. The Gujarat government may also provide additional subsidies.

While riding on the semiconductor JV, Murugappa Group focuses on improving its JV revenue. The country's projected growth of US$ 80.3 bn by 2028 for the semiconductor sector aligns with this group's initiative.

You can choose to participate in this booming opportunity piggybacking on the Murugappa group.

Goes without saying that sustained research should not be compromised.

Happy investing!

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

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