X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Tata Investment Corp.: Excellent track record - Outside View
 
 
Tata Investment Corp.: Excellent track record

A representative of the cats and dogs?

In stock market terminology, Tata Investment Corporation is a 'representative' of the 'cats and dogs' of the stock markets. Not completely forgotten, but a borderline case nevertheless. A pity, since the company is not an underperformer by any yardstick-it is in reality an outperformer based on the performance of the benchmark indices over a similar time span. The 73 year old Tata Company, in which Tata Sons has a 70% equity stake, apparently does not necessarily have to look askance at the powers that be in Bombay House, where it is located, in defining its investment strategies. The total book value (or cost) of its investment portfolio in the equity/preference /debentures in India Inc at end March 2010 amounted to Rs 13.1 bn. Of this less than 14% was in 'group' companies or in 'related' companies. Such investments in group companies also accounted for close to 12% of the total 'market value' or 'net asset value' totaling Rs 36.4 bn at year end.

Pure play investment companies are not generally punted on by market clairvoyants. Besides, in such instances as Tata Investment Corporation, the underlying belief is that its primary goal is to shore up the 'housekeeping' of the incumbent business house. Add to this the fact that the bulk of the outstanding voting capital in such companies is in family hands, and this alone reduces the floating stock available for churning.

Outshining the market

Its total investment portfolio of equity, preference, debentures etc. has actually outshone the Sensex over a 10 year time span. Take a look at the evidence. In FY01 end, the book value of its investments was valued at Rs 2.7 bn. The corresponding market value was Rs 4.6 bn (market value is 70% more than book value). Cut to FY10 end. The book value of investments was Rs 13.1 bn while the market value stood at Rs 36.4 bn (that is 179% more). Implying a total increase of 378% and 684% respectively in book and market values, over the base period. Juxtapose this with the Sensex gyration over the same time span. The Sensex which closed at 3604 points on 31st March 2001, appreciated to 17528 points on 31st March 2010. That works out to a relatively paltry increase of 386%. Thus, the percentage increase in the marketable value of its investments completely overshot what the Sensex had to show for its efforts.

Portfolio of investments

Its investments, excluding inter-corporate deposits at year end, spans some 21 different industrial segments and encompasses 197 companies- a far cry from FY98 when it peaked at 441 companies. Since then there has obviously been a dramatic change in its investment strategy. Where the company prefers to stay close to the knittings, is when it doles out surplus funds in the form of inter-corporate deposits. The Rs 1.1 bn in such deposits at year end appear to have been made with some or all of the 9 subsidiaries of the company. As a matter of fact it had placed such inter-corporate deposits to the tune of Rs 2 bn with these subsidiaries during the year, and also withdrawn Rs 1.9 bn from them. Smart thinking alright. It is of course difficult to quantify the percentage rate of interest earned on these deposits, as the quantum and tenure of each of these deposits is not known.

Its single biggest equity investment in book value terms, amongst the group companies, which is also its single biggest investment in any company, is in Tata Capital, a newcomer in the Tata Group's scheme of things. The total investment in this unlisted company that it made in FY10 is Rs 780 m (65 m shares).

Top 14 investments in Tata Group companies
Name Rs (m) Shares (m)
Tata Capital 780.0 65.0
Tata Motors 718.0 2.8
Tata Steel 618.0 3.4
Indian Hotels 588.0 10.0
Tata Chemicals 455.0 15.8
Trent India 415.0 0.7
Titan Industries 171.0 0.9
Tata Asset Management 195.0 5.3
Tata Elxsi 162.0 0.7
Tata Teleservices 158.0 5.0
Tata Tea 74.0 2.8
Tata Auto Comp Systems 70.0 2.7
Voltas 36.0 9.5
Tata Power 23.0 0.6
Total 4463.00 125.20

These top 14 investments, in a manner of speaking, are 'tied' investments as they add to the crucial 'controlling' stake of the Tata Group. The much smaller investments in group companies such as in Tata Consultancy Services, Taj GVK Hotels, Rallis, and Tata Sponge Iron do not add up to much, and are hence possibly jettisonable. For the matter of record the book value of its biggest equity investment in a listed non Tata company is NTPC at Rs 156 m followed by Reliance Industries at Rs 109 m. But its biggest such investment in a non Tata company is National Stock Exchange at Rs 206 m.

It also has investments in the equity capital of 23 Sri Lankan tea companies on which there does not appear to be much 'due diligence' for the benefit of non management shareholders.

Rolling over portfolio

It has quite some pennies also locked up in the debentures of group companies - Rs 634 m at year end (an attractive proposition) and in preference shares - Rs 450 m. But all these instruments have very attractive coupon rates and, maturity periods too, and hence redeemable at some point of time. Its investment in group mutual fund schemes is Rs 600 m.

The prime factor that apparently determines the tenure of its top gun investment management honcho is not the dividend income that accrues each year, but rather the profit made on rolling over its portfolio. Such profit accounted for 65% of all income during the year up from 61% previously. Total income from all investment outlets grew from Rs 448 m in FY01 to Rs 2.4 bn in FY10, a rise of 427%. Thanks to double taxation benefits, the post tax profit grew 372% to Rs 2 bn. This in turn enabled the management to increase the dividend payments to Rs 726 m from Rs 109 m in FY01. The dividend outflow accounting for 37% of post tax profit, up from 26%. The only sore point in a manner of speaking is that bonus shares account for just 34% of its paid up equity of Rs 482 m.

Stargazing

With India Inc on the threshold of scaling new heights, both within and without the Indian borders, and with the economy on a long term fast roll forward, it is only fair to say that Tata Investment Corporation may continue to outperform an aggressively growing stock market, assuming of course that the investment decisions do not encounter any hiccups along the way.

Disclosure: Please note that I am not a shareholder of this company

This column "Cool Hand Luke" is written by Luke Verghese. Luke has been a business journalist, financial analyst and knowledge management head with a professional experience of more than 20 years. An avid watcher of the stock market, he has written extensively on stock market trends. His articles have featured in Business Standard, Financial Express and Fortune India amongst others. He has also been the Deputy Editor, Fortune India and the Financial Editor of The Business and Political Observer.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.
Equitymaster Agora Research Private Limited

 

Equitymaster requests your view! Post a comment on "Tata Investment Corp.: Excellent track record". Click here!

3 Responses to "Tata Investment Corp.: Excellent track record"

suresh

Sep 21, 2010

Dying to understand why pureplay investment companies are not punter's favorites!

Like (1)

utpal

Sep 18, 2010

I have holdings in many Tata Comapnies e.g. Voltas, Tata Power, Tata Tea etc. Would it be better idea then to liquidate those positions and invest in the Tata Investment as a proxy? What are the merits and demerits?

Like (1)

col bhupinder singh

Aug 5, 2010

Its a excellent company paying regular & good dividend. A must have share in a portfolio.

Like (1)
  
Equitymaster requests your view! Post a comment on "Tata Investment Corp.: Excellent track record". Click here!
 

More Views on News

HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

Aug 10, 2017

HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

Jun 22, 2017

Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

Jun 14, 2017

Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

May 30, 2017

IDFC regains its tempo in FY17 post the demerger of the banking business.

HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

May 9, 2017

HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

More Views on News

Most Popular

Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

Aug 7, 2017

The data tells us quite a different story from the one the government is trying to project.

A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

Aug 10, 2017

Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

Aug 8, 2017

Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

Signs of Life in the India VIX(Daily Profit Hunter)

Aug 12, 2017

The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

Aug 7, 2017

Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

More
 

Become A Smarter Investor In
Just 5 Minutes

Multibagger Stocks Guide 2017
Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

TATA INVEST. CORP. SHARE PRICE


Aug 18, 2017 (Close)

TRACK TATA INVEST. CORP.

  • Track your investment in TATA INVEST. CORP. with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
  • Add To MyStocks

MORE ON TATA INVEST. CORP.

TATA INVEST. CORP. - KITEX GARMENTS COMPARISON

Compare Company With Charts

COMPARE TATA INVEST. CORP. WITH

MARKET STATS