Insider Selling in Tata Technologies, Tata Motors Demerger Impact, and More...

• "The combined market capitalisation of all listed Tata stocks recently crossed the Rs 30 lakh crore mark, making the group's value bigger than the entire economy of Pakistan!"

This comment I read on WhatsApp recently seems appropriate.

Tata Group stocks have been rallying non-stop this week.

Tata Investment... Tata Chemicals... Tata Motors... you name it, and the group company would be sitting on pretty decent gains.

Such is the insanity in the markets right now.

Among the group companies, Tata Technologies share price gained over 5% today after touching a 52-week low not long ago.

About Tata Technologies

Tata Technologies' primary business line is services, which includes providing outsourced engineering services and digital transformation services to global manufacturing clients helping them design better products for their customers.

The company has been positioned in the leadership zone by Zinnov Zones for Engineering Research & Development (ER&D) services ratings in 2023 for the seventh consecutive year.

The company is also ranked first among all India-based ER&D service providers and is among the top two globally in electrification.

Insider Selling in Tata Technologies

The Indian share market scaled a new peak today, but the insider activity is sounding alarm bells.

At Rs 1.1 trillion, insider selling this year has been almost 2x of insider selling in 2020. And almost six times higher than 2018.

Opposite trends in insider activity and institutional activity, in the context of high valuations, has led to a dilemma of whether to stay put or get out.

We could already see foreign investors (FIIs) pulling out money from financial and banking stocks in recent days.

Add to that the latest insider selling in Tata Technologies.

Data on the BSE website shows that the special board advisor member Patrick McGoldrick netted millions by selling his shares in the open market.

Notably, that recent sale was the biggest insider sale of Tata Technologies in the last one year.

If you follow the trend of insider selling to insider buying regularly, interesting patterns and conclusions emerge.

In recent months, and for most part of 2023, the insider trades were more skewed towards selling than buying. It's definitely an eye-opening statistic.

Tata Technologies Q3 Results

In January 2024, Tata Technologies posted a 6% sequential rise in its third quarter net profit while revenue remained more or less the same as compared to September 2023 numbers.

On a YoY basis, Tata Technologies' net profit of Rs 1.7 bn was 15% higher compared to Rs 1.5 bn reported in the previous year period.

The company's CEO Warren Harris said...

• We delivered sequential growth and a healthy operating EBITDA margin at 18.3% in Q3FY24 while making strategic investments in relationships to enable future growth.
  
  Our deal win momentum has stayed robust, with 5 large deals won in the quarter, including one deal with over $50 million in TCV and another one with $25 million in TCV.

After announcing results, the company, in a separate development said Agratas - Tata Group's global battery business - and Tata Technologies have announced their collaboration to scale the former's product development and enterprise systems.

Agratas will accelerate its product development timelines, including integrating battery cells into modules and packs across multiple applications to match customer requirements.

What Next?

In a recent interview with CNBC, Warren Harris sees the company sees no slowdown in momentum from an ER&D perspective.

He also shed some light on the recent demerger of Tata Motors, which is among Tata Tech's major clients contributing to roughly 33% of its revenue.

According to Harris, the demerger will help Tata Motors harness the synergies between JLR's passenger vehicle (PV) and EV businesses better.

Since Tata Tech is closely associated with both these businesses, the company is ideally positioned to benefit from these synergies between divisions.

Going forward in the last quarter of 2024, Tata Technologies is anticipating strong traction in terms of deal wins.

How Tata Technologies Share Price has Performed Recently

Tata Technologies share price rose more than 6% in early trade today to touch a high of Rs 1,147 on the BSE.

In 2024 so far, the stock is down 4% while since listing in November 2023, Tata Tech share price is down 7%.

Tata Technologies has a 52-week high of Rs 1,400 touched on 30 November 2023 and a 52-week low of Rs 1,034 touched on 29 February 2024.

At the current price, the company trades at a PE multiple of 69x and a price to book value multiple of 13.7x.

Here's a table comparing Tata Technologies with its peers.

Comparative Analysis

Company	Tata Tech	KPIT Tech	Route Mobile	Tanla	Zensar Tech
ROE (%)	23.7	26.6	19.4	31.6	11.7
ROCE (%)	30.9	35.1	22.4	39.7	16.7
Latest EPS (Rs)	15.4	19.8	61.9	40.1	26.9
TTM PE (x)	69.5	76.2	25.7	23.7	20.9
TTM Price to book (x)	13.7	20.5	4.7	6.8	3.7
Dividend yield (%)	0.2	0.3	0.7	1.1	0.9
Industry PE	32.1
Industry PB	8.4

Data Source: Ace Equity

For more details, check out Tata Tech's fact sheet and quarterly results.

Happy investing!

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...