Tata Group's NBFC: After 129% Jump, 2024's Top Winning Stock Takes U-Turn, Falls By Rs 2,580 In 6-Sessions

The stock market is a strange place, with its nerve-racking dives to mind-boggling takeoffs. Nevertheless, it's a great place to fetch better returns than any other investment option. One such moment is being relieved by India's giant conglomerate Tata Group-backed financing stock, Tata Investment Corporation.

Tata Investment emerged as one of the biggest winner of 2024 with a multibagging upside. However, since last week, the stock has taken a setback, falling for the sixth-consecutive session on Monday, with a staggering over 26% drop during this period.

The last time Tata Investment was in green was on March 7th, when it rallied to freeze at its new all-time high of Rs 9,756.85 apiece on BSE.

The strange thing about Tata Investment is that it has no analyst coverage and has never carried a stock split. Accordingly, the stock has lack of liquidity.

2024's Biggest Winner:

The start of the new year has been a banger for Tata Group stocks, especially for Tata Investment which recorded an extraordinary bull run, more than doubling from the levels that it ended 2023 with.

At the start of 2024, Tata Investment's share price stood at Rs 4,258.70 apiece on the NSE. But scaled up with periodic excessive buying sprees on numerous occasions. Tata Investment's month-on-month gains were robust with a surge of 32.33% in January 2024, followed by a 26% upside in February.

But the start of March 2024 has been exceptional. In just the first six trading sessions, Tata Investment rallied by 28% to hit a new record high of Rs 9,756.85 apiece on March 7, 2024.

The reason behind the strong bull trend was due to buzz related to Tata Sons that the Tata Group's holding mega giant could list within the next 1 and half years.

Brokerage Spark Capital had stated that years: RBI classified Tata Sons as an upper-layer NBFC last year, which makes it mandatory for the company to list itself on the exchanges by Sep-25. Its research note said, "We believe that this event could likely lead to the simplification of the complicated group holding structure of the Tata Group and enable some of the listed holding companies to liquidate its holding within the giant parent conglomerate."

Further, Spark Capital highlighted the market value of investment estimates in Tata Sons. As per the brokerage, the market value of Tata Sons' listed investments is estimated at ~Rs16 lac crore and the book value of the unlisted investments is ~0.6 lac crore. It is worth noting that the market value of the unlisted investments could be much higher(~1-2 lac crore) given the groups foray into semiconductors and EV batteries.

While investors are likely to give a HoldCo discount of 30-60% while calculating the equity value, Spark Capital's note said, "We value Tata Sons at ~Rs7.8 lac crore post factoring for a 60% HoldCo discount of its listed investments and valuing the unlisted investments at ~Rs1.6 lac crore. We note that the HoldCo discount given by the street to Godrej Industries and Bajaj Holdings is in a similar range. A change in the HoldCo discount assumption of ~10% could lead to a ~Rs 1.5-1.6 Lac Crore change in the equity value of Tata Sons."

The buzz that Tata Sons IPO was not far away led to a massive rally in all Tata Group stocks so much so that it bagged over Rs 1 lakh crore market value in the first week of March.

Tata Investment was in a similar symphony. From January 1 to March 7, 2024, Tata Investment led a massive 58 billion dollar rally, with the majority of it covered in the first week of March. During this period, Tata Investment had gained by over 129% and emerged as an outperformer in the Nifty 500 index.

Nifty 500 companies account for over 94% of Indian market's valuation.

Tata Investment's U-Turn:

Since March 11, Tata Investment has been in the red, hitting back-to-back 5% lower circuits.

From March 11th to 18th, Tata Investment has shed by Rs 2,584.6 or 26.5% on NSE. It is one of the top underperforming stocks currently.

On Monday, the latest price was at Rs 7,172.25 apiece, yet another 5% lower circuit.

Lower circuits mean that there were several sellers in Tata Investment but no buyers. And that has been the case since March 11th. Investors are cashing in on their gains.

The latest bearish trend can be due to two reasons. Firstly, right after its exponential weekly rally, doubts over Tata Sons IPO escalated as reports stated that the Holdco is looking at other options to avoid public listing.

It needs to be noted that Tata Sons has made no official statement regarding its IPO buzz. Also, GoodReturns.In could not confirm the same.

Secondly, there have been sharp selloffs in overall midcap and smallcap stocks since last week due to market regulator Sebi revising its guidelines for investment in these smaller companies amid rising concerns about stretched valuations of the segments. Midcap and small caps across segments have been under pressure.

Tata Investment is a midcap with a market valuation of Rs 36,288.21 crore.

Tata Investment Corporation Limited was promoted by Tata Sons Ltd., in 1937, under the name The Investment Corporation of India Limited. The Company remained a closely held company till 1959, when it became one of the few publicly held investment companies listed on the Stock Exchange, Mumbai. During the 1960s and 1970s, the Company's activities underwent a gradual transformation from assisting in the establishment of new ventures to acting as an investment company with a diversified portfolio of investments.

Tata Investment funds a diversified portfolio of quoted and unquoted securities of companies, including Tata Companies, which are engaged in various businesses with a history of strong operating and financial performance.

Among its corporate affairs, Tata Investment has delivered 28 dividends since September 2000, and paid bonus shares one time in the ratio of 1:2. Its dividend yield is at 0.7%. But Tata Investment has made no splits and is also among the expensive stocks of Tata Group in terms of per equity share.

Disclaimer: The write-up is just for information purposes, and is not a recommendation to buy, sell or hold. We have not done fundamental or technical analysis and have no opinion on the stock mentioned. Neither, the author nor Greynium Information Technologies should be held liable for any losses. Please consult a professional advisor.