1,300% in One Year - Are You Kidding Me?

Despite the economy taking a beating as a result of the coronavirus, the stock market managed to reward investors with some substantial gains in the last one year.

Since November 2020, the benchmark index has gained about 29% while midcap and smallcap indices have gained 45% and 63%, respectively.

Among the midcap space, Tata Teleservices is a multibagger penny stock that has given phenomenal returns to its shareholders.

The stock has surged over 1,344% in the last one year, from Rs 7 in November 2020. The stock is up 113% in the ongoing month itself.

What could be the possible reason behind this rally?

In the month of May 2021, media reports suggested Tata Sons is reviving Tata Teleservices in a new avatar called Tata Tele Business Services (TTBS), which will cater to small and medium enterprises (SME).

The stock of the company is witnessing heavy buying since then.

The revamped company will also support Tata Electronics, which was created to tap the SME segment, and its SuperApp digital platform, which will bring its various consumer services together.

For the unaware, the telecom operator went out of business when Reliance Jio came to the market, and the eventual tariff war broke out.

Tatas then signed a pact that transferred the consumer mobile business to Bharti Airtel, excluding the transfer of debt.

Back in 2020, Tata Sons had written off its investment of Rs 286 bn in Tata Teleservices.

Tata Tele Business Launched Smartflo

The company has already launched a product called 'Smartflo'. It's a cloud-hosted communications platform built specifically to cater to the needs of SMEs.

The platform stands to benefit the people who have a hybrid work culture wherein they work from home and other remote locations.

Smartflo is a very simple platform that users can access through both desktops and smartphones. TTBS will offer users call monitoring, intelligent call routing, and a dashboard to check all the outbound and inbound calls to the business.

The service from TTBS will stand to benefit businesses that deal with a large number of customers on a daily.

Last month, the company had announced the launch of Smart Internet, the industry's first smart internet leased, single suite, combining high speed internet with cloud-based security and greater control at an optimised cost.

Harjit Singh Chauhan, president of the enterprise business at Tata Teleservices, is heading the revamped entity, which is also looking at the 5G space, where it will offer services to other telecom operators.

Company's 5G effort will help to unlock value for shareholders

Tata Teleservices is further looking at the 5G space to grow its business. The 5G space will be very crucial for the enterprise segment since that is where all big money will be.

The firm can leverage the arrival of 5G in India as an opportunity to offer services to both telecom operators and SMEs and grow its business multiple folds.

The holding company of Tata Teleservices, Tata Sons acquired a controlling stake in telecom equipment maker Tejas Networks in July 2020.

To compete with other listed players, Tata group has been constantly trying to strengthen its telecom enterprise play under Tata Communications (TCS) and Tata Teleservices as well as seeking to enter contract manufacturing.

Promoter's stake

Tata Group companies hold a 74.36% stake in the company, according to the latest shareholding pattern.

Tata Teleservices holds a 48.3% stake in the company, while Tata Sons and Tata Power hold 19.58% and 6.48% stake, respectively.

Individual shareholders held 23.22% holding in the company.

To know more, check out Tata Teleservices' latest shareholding pattern.

All is not well with the financials

Since 2009, the firm has posted losses except for two quarters. The company has reported losses in 47 out of 49 quarters. For quarters ended March 2019 and June 2016, the firm reported profit.

Meanwhile, for first half (April-September) of the financial year 2021-22 (H1FY22), the company narrowed its net loss to Rs 6.3 bn from Rs 14.1 bn during the same period of the last year.

Its current liabilities exceeded its current assets as on 30 September 2021.

Key Financial Parameters

Particulars (Rs in bn)	FY21	FY20	FY19
Total Revenue	10.7	11.1	18.1
Profit\Loss After Tax (PAT)	-20	-37.1	-6.7
Debt to equity ratio	-0.5	-0.4	-0.4
Return on equity	11%	21%	4.5%

Data Source: Equitymaster

However, the company is confident of meeting financial requirements. The promoters of the company said they will take necessary actions to organise for any shortfall in liquidity during the period of 12 months from the balance sheet date. The company in its new avatar is called Tata Tele Business Services.

Meanwhile, the company has informed to Department of Telecommunication's (DoT) about its decision to opt for deferment of its adjusted gross revenue (AGR) related dues by four years.

It has also Informed DoT that decision of converting interest amount in equity shall be conveyed within stipulated time limit of 90 days from DoT letter dated 14 October 2021.

That apart, the company has also projected to witness growth in the years to come on the basis of wide optical fiber network of 132,000 kms, as the company has strong brand presence across customers in this business with deep customer relationships.

How the stock markets reacted to Tata Teleservices

Shares of Tata Teleservices opened the day at Rs 106.6 on the BSE and Rs 105.5 on the NSE.

Its share price closed at Rs 106.6 (up 5%) on the BSE and Rs 107.2 (up 5%) on the NSE.

The share touched its 52-week high of Rs 106.6 and 52-week low of Rs 6.7 on 29 November 2021 and 27 November 2020, respectively.

Over the last 30 days, share price of Tata Teleservices is up 113%. Over the last one year, the company's share price is up 1,344%.

About Tata Teleservices

Tata Tele Business Services, formally known as Tata Tele Services, is an Indian broadband, telecommunications and cloud service provider based in Mumbai.

It is a subsidiary of the Tata group, an Indian conglomerate. It operated fixed line services under the brand name Tata Tele Broadband in various telecom circles of India.

Tata Teleservices used to provide mobile services under Tata DoCoMo (GSM mobile operator, wireless broadband).

In August 2017, Tata Teleservices sought to exit mobile network division due to large losses and debt. It then sold its unit to Bharti Airtel in a debt free and cash-free deal and described as virtually free.

For more details about the company, you can have a look at Tata Teleservices' factsheet and quarterly results on our website.

You can also compare Tata Teleservices with its peers.

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