4 Tata Group Stocks to Watch Out For (Hint: Big Growth Plans Ahead)

Editor's note: The Tata group recently announced its plans to halve the number of its listed companies to 15 from 29 in the coming months.

The aim is to synergise strategy to scale and improve cashflows in the larger companies. A lot of management time and effort that's put into smaller companies will also be minimised through this effort.

The group is also betting on new areas of growth and future businesses. To make this a success, efficient capital allocation is imperative to build large competitive companies.

In May 2022, we wrote to you about four Tata group stocks that have big growth plans ahead. Read on to find out what these companies have been up to since then.

Tata Group Stocks with Big Growth Plans Ahead

In the month of September 2021, Equitymaster's conducted a poll consisting of 17 of the most popular corporate groups in India.

With an overwhelming response from 5,274 participants, we found out that Tata Group is the most trustworthy corporate group.

Rakesh Jhunjhunwala, India's veteran investor rightly said during an interview in February 2021, "I think, the house of Tatas is blessed by God."

And rightly so.

With more than thirty companies (listed and unlisted) across 10 business verticals in their portfolio, Tata Group elicits immense confidence and trust from their investors and stakeholders. This has kept the conglomerate thriving with a competitive market edge amid brutal opposition.

Be it one of their smallcap, midcap, or largecap companies, all of them have successfully built a strong foothold in their respective segments.

In the ongoing bull run and despite the challenges posed by the pandemic, the conglomerate has delivered consistent returns for its shareholders.

Perhaps, this will help put things into perspective.

Under Chandrasekaran's reign, Tata Group stocks' market value nearly tripled, which is a 199% rise in the five year period starting February 2017.

More recently, not only did 7 of its 29 listed stocks doubled investor wealth but the 29 publicly listed Tata enterprises boast of a combined market capitalisation of Rs 23.4 tn as of December 2021.

Given the impressive performance over the last few decades, there's more to come when it comes to growth plans of Tata group companies.

In this article, we highlight just that...the Tata group companies with big growth plans.

Watch out for these 4 Tata Group stocks that have big plans ahead.

#1 Tata Consumer Products

Tata Consumer, headed by the chief executive officer (CEO) Sunil D'Souza, is the food, beverages and out-of-home retail arm of the Tata Group. Today, it is the 7th largest Fast Moving Consumer Goods (FMCG) company in India.

Home to a diverse range of iconic brands like Tetley, Himalaya, Tata Cha, and Starbucks, the company commands a global presence across major countries on four continents.

In line with the ambition of becoming the market leader in the FMCG space, Tata Consumer embarked on a journey of transformation despite the challenges in operation brought on by the onslaught of the pandemic.

A major move involved the merger of Tata Coffee with Tata Consumer in March 2022. Earlier in the year, the company united Tata Chemicals' salt and branded lentils business with Tata Consumer.

The mandate for the leadership at the helm is to build a giant FMCG company which is also agile and nimble in the marketplace.

Keeping in line with this sentiment, Tata Consumer has plans to go on an acquisitions spree to widen its portfolio.

Although the company remains tight lipped about its potential targets, it has already started making forays by acquiring stakes NourishCo Beverages, a bottled-water business, and the cereal brand Soulfull.

The company plans to enter the home and personal care space with their acquisitions led strategy and venture into competitive categories like washing detergents, home cleaners, and hair and body care products like shampoos, body washes, and creams.

With sizeable cash of around Rs 30 bn on its balance sheet funded by Tata Sons, the company intends to give serious competition to the likes of Hindustan Unilever (HUL) and Reliance.

Tata Consumer is also looking to make an enormous runway in the out-of-home retail segment with accelerated expansion plans for Starbucks. The company plans to open 1,000 outlets in India over the next few years.

The company's ambitious future growth plans resulted in Tata Consumer's stock surging by 27% last year.

With a market cap of Rs 750 bn, the stock outperformed all the consumer goods stocks except ITC.

No doubt, a pipeline of growth plans in place makes Tata Consumer a stock to add to your watchlist for 2022.

Update: Tata Consumer has announced its foray into the health supplements segment with the launch of Tata GoFit, a range of health supplements for women.

The launch is in line with TCP's focus on accelerating innovation, strengthening its wellness portfolio and expanding its total addressable market.

More recently, the company also forayed into alternate meat segment with its plant-based meat category under the "Tata Simply Better" brand.

#2 Tata Elxsi

Founded as a joint venture in Bengaluru in 1989, Tata Elxsi is one of the prominent global providers of design based technology services across industries led by Manoj Raghavan as its CEO and Managing Director.

The company went public in 1991-1992 and was the first few in India to venture into Embedded Product Design (EPD) in the late 1990s. Since then, Tata Elxsi has become a force to be reckoned with in this segment.

Tata Elxsi recorded phenomenal growth across all key divisions in revenues, margins, and customer additions in the last financial year.

The company has outlined its vision for 2023 which includes doubling the revenue, maintaining segment leading margins of 22% and mitigating business risk by diversifying its revenue profile.

With strong demand for its products and services, Tata Elxsi is seeing significant growth in the automotive market. The company is in talks with several OEMs and suppliers in electric vehicles (EV) to develop its autonomous technologies and engineering leadership through strategic deals.

A memorandum of understanding (MoU) was signed in July 2021 with Kinfra to expand its IT business and research and development (R&D) facilities in Kerala.

With a sizeable international clientele, the company continues to gain market share and strengthen its position in the industry with their plans to build on capabilities in healthcare, transportation and media and communications businesses.

Tata Elxsi is ahead of the game when it comes to content generation, big broadcasters, and OTT platforms, recording a 20% year on year (YoY) growth. With expertise in EPD, the company made some sweet margins in top line healthcare, largely because of the pandemic.

In the transportation segment, the company is looking to foray into the rail industry, working with leading operators, metro and rail authorities across the globe.

The company has won strategic multi-year large deals in the fourth quarter of 2021-2022 against the best global competitors in all three core segments.

Tata Elxsi shares have been flirting around the Rs 9,000 range and is one of the most expensive IT stocks in India. This multibagger stock increased by 215% in one year and scripted a remarkable turnaround in the last decade.

There are ample reasons to bet on the company's future potential as there is no doubt that Tata Elxsi has made a name for itself.

Update: Tata Elxsi, has joined the Digital Therapeutics Alliance, a global non-profit trade association. The company is focused on transforming global healthcare by advancing digital therapeutics (DTx).

Tata Elxsi, which has multiplied 10x in less than 3 years, will build robust solutions for the development and deployment of DTx solutions.

#3 Indian Hotels Company

Indian Hotels Company (IHCL) is one of South Asia's oldest and largest hospitality chains and is home to the iconic Taj brand. With a strong heritage and rich legacy, IHCL has maintained a leadership position in the global landscape of luxury hospitality over the past century.

Since the opening of the Taj Mahal Palace in Mumbai in 1903, the company has evolved from a single establishment to a dynamic hospitality ecosystem.

With 76 hotels in its portfolio which translates into 10,488 room keys, the hotel chain has perfected its craft and earned a reputation of being one of the best in the business in 117 years.

The revival phase of the hospitality industry post pandemic has been at a healthy pace. According to Puneet Chhatwal, MD and CEO, the key drivers of IHCL's growth story continue to be a strong focus on industry leading ESG+ framework and digital.

Taking the vision forward, IHCL unveiled Ahvaan 2025 with plans to build a profitable cohort of 300 hotels leveraging its strong brand equity aligned with high growth segments.

Ahvaan 2025 is designed to accelerate these growth plans by scaling its diversified brand portfolio across its traditional and new businesses.

The IHCL roadmap includes reengineering its margins, reimagining its brand-scape and clocking 33% earnings before interest, taxes, depreciation, and amortisation (EBITDA) margin.

The target is to reach a 35% EBITDA share contribution from new businesses and management fees by the financial year 2025-2026.

To keep up with the momentum, the company has already embarked on its growth trajectory by opening 40 hotels in the past five years labelling it as one of the fastest growing hospitality chains in India.

The company intends to adopt an asset light model of operations which involves balancing a 50-50 portfolio of owned hotels versus management contract hotels.

IHCL is moving steadily towards a zero-debt future by minimising losses to Rs 2,650 m in the financial year 2021-22.

With plans to raise Rs 40 bn in equity to help fund their expansion plans over the next few years, IHCL is a Tata Group stock that warrants looking into.

Update: Indian Hotels is witnessing a surge in demand as occupancy and rates exceed pre-Covid 19 levels.

The company reported a net profit of Rs 1.7 bn for the June 2022 quarter. The hospitality group had reported a loss of Rs 2.8 bn during the corresponding period last year.

This also resulted in a milestone operating profit margin of 31.3%.

Indian Hotels, being among the top hotel stocks in India, stands to immensely benefit as prospects of the hotel industry look strong.

#4 Titan

Tracing back a parentage to the Tata Group and the Tamil Nadu state government, Titan is the world's largest and integrated watch manufacturer and one of India's most respected and admired companies.

Pioneering customer centric innovation, Titan was founded in 1984 as a premier lifestyle company that now has footprints in jewellery, watches, fragrances, eyewear, and Indian dress wear segments.

Led by MD C K Venkataraman, the company has always been at the forefront of leveraging cutting-edge technology to delight its discerning customers.

Under the new leadership, Titan has ambitious plans to transform itself from Rs 200 bn legacy lifestyle company into a young, edgy organisation.

The fuel its growth plans, the company's vision is to resonate with and make itself relevant to the aspirational Indian millennial.

Titan is looking to expand across verticals with the company's wearable division leading the way. With analog watch sales on the decline, Titan pivoted to embracing technology and invested in creating proprietary capabilities to drive growth in this segment.

The company united with HUG Innovations, a Hyderabad based technology and wearables firm last year to strengthen its portfolio.

Being the #2 in the smart wristband segment, Titan is eager to multiply its sales volumes. To reach this milestone the company has already opened 27 stores in the current financial year and has another 10 to 12 stores in the pipeline before the end of the fiscal year.

Next, the unprofitable eyewear division recorded its best ever performance in 2020-2021. The company shut around 15 of its unviable stores and is looking to shift focus from frames to lenses.

Titan took up one of its biggest ever expansion plans for this division opening 125 stores over a nine month period. The company aims to increase the network count from its current 707 to 1,000 by 2022-2023.

This watches to jeweller maker is eyeing international expansion for its jewellery division with plans to launch approximately 20 stores in markets like the United States, Canada and Gulf Cooperation Council (GCC) countries in the next three years.

Titan is making determined inroads into regional markets including smaller cities and towns across all three key divisions.

The company has plans to foray deeply into under-penetrated segments like fragrances and deodorants with its existing brand Skinn and Fastrack perfumes. Taneira, its premium Indian dress wear brand is also expected to emerge as a revenue driver for the company over 18 to 24 months.

By 2023, Titan expects a 40% growth in its top line and 50% in EBITDA which makes the business poised at the brink of phenomenal growth over the next 5 years.

Update: Titan has signed an agreement with Manappuram Jewellers for the manufacture of gold and diamond jewellery.

Under the agreement, Manappuram Jewellers, which has a manufacturing unit in Bengaluru, will make premium gold jewellery based on specific requirements and designs provided by Titan.

The agreement will be valid for two years.

How Tata Group Plays a Critical Role in India's Growth Story

Tata Group is perhaps the first name that springs to mind when one talks about the globalisation of Indian companies. Despite its humble beginnings, the conglomerate has always had an international outlook.

The trust earned over the years has proven to be the differentiator that has ensured the survival of the group.

As India was poised for global supremacy the Tata Group was spearheading the global Indian takeover with key acquisitions like Tetley, Corus, Jaguar and Land Rover. The vision of the parent company has penetrated across its 30 odd businesses.

The transformative initiatives across companies like Tata Consumer, Indian Hotels, Tata Elxsi and Titan are a testament to its reloading growth.

All of these companies turned into opportunity hunters when the time was right. The idea was to keep pushing boundaries to be simpler, more sustainable, and more technologically advanced.

Needless to say, the expectations are high, and the future looks exciting. There's definitely more in store.

To know more, check out the below video by Co-head of Research at Equitymaster, Rahul Shah where he unveils if Tata Group is a genuine wealth creator for investors in India.

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...