Fundamental Analysis of Stocks

Extended non-performance period and failure to surpass its IPO issue price of ₹ 36. Investors almost wrote off NHPC. 

But something changed for the stock in the last couple of years. A greater push for renewable energy and favorable government policies led to strong demand for the stock, helping it cross the ₹100 threshold for the first time on February 2, 2024. 

In this article, we will perform a fundamental analysis of the NHPC share price and examine the stock’s long-term growth potential. Let’s begin. 

What does NHPC Do?

NHPC is a state-owned hydropower generation company that develops, operates, and sells bulk power to state utilities. 

Recently, it has also diversified into developing solar and wind energy projects. 

As of 31st October 2024, the company operates 22 hydropower stations, five solar power projects, and one wind energy project, with a combined installed capacity of over 7,200 MW. 

Along with its multiple joint venture partners, NHPC is currently developing 15 renewable energy projects, a mix of hydro and solar, with an installed capacity of over 10,000 MW.

Apart from selling energy from all its renewable energy projects, it earns revenue from power trading, contract execution, project management, and consultancy work. 

NHPC Management Team

Shri Rajendra Prasad Goyal is the Chairman and Managing Director of NHPC and holds the additional charge of Director (Finance). He started his career with NHPC in 1988 as a Senior Accountant and rose through the ranks, serving the company on various key projects. He is an associate member of ICAI and holds a Master’s Degree in Commerce from the University of Rajasthan. 

Shri Uttam Lal is the Director (Personnel) and has over 35 years of rich experience in human resource policies, industrial relations, employee benefits, and learning and development. Before joining NHPC, he headed the HR functions of the R&D wing of NTPC. Shri Lal has a management graduate degree from XISS, Ranchi, with an additional qualification of Bachelor of Law (HRM) and Harvard Manage-mentor certification. 

Shri Raj Kumar Chaudhary is the Director (Technical) at NHPC, overseeing the development and operations of various projects in India and Bhutan. He joined NHPC in 1989 as a Probationary Executive (Civil) and rose through the ranks of his career to the post of Director (Technical). 

Shri Sanjay Kumar Singh is the Director (Projects), and before joining NHPC, he was the Chief General Manager of SJVN Ltd. He has over 32 years of experience in the Power & Infrastructure sector. Shri Sanjay holds a degree in B.Tech (Civil) and has worked at various levels for key project activities like Project Construction, Survey & Investigation, preparation of detailed project reports and cost estimates, project planning and execution, and many other things. 

NHPC Shareholding Pattern

In the Domestic Institution segment, mutual funds in India hold a 3.63% stake in the company, and the Life Insurance Corporation of India has a 3.96% stake. 

NHPC Financial Performance

Revenue

In FY24, total income declined by 1.24% to ₹10,025 crores from ₹10,150.90 crores in FY23. 

And, in the first half of FY25, total income increased by 5.1% to ₹6,440 crores from ₹6,124 crores reported in the same period last year. 

EBITDA

In FY24, EBITDA growth was flat and decreased slightly to ₹5,733 crore from ₹5,743 crore in FY23. However, the EBITDA margin improved to 68% in FY24 from 61.65% in FY23. 

Net Profit

In FY24, NHPC recorded a 2.3% decline in net profit at ₹3,743.94 crores, down from ₹3,833 crores in FY23.

In the first half of FY25, net profit decreased by 21% to ₹2,177.74 crores from ₹2,788.64 crores reported in the same period last year. The company’s net profit margin declined to 37.90% at the end of H1FY25 from 49% at the end of H1FY24. 

NHPC Financial Ratios

Current Ratio: At the end of Q2FY25, the company’s current ratio declined 1.15 times from 1.24 times recorded in the same period last year. 

Debt-Equity Ratio: At the end of Q2FY25, the debt-to-equity ratio increased to 0.90 times from 0.82 times in Q2FY24. 

Debt Service Coverage Ratio (DSCR): The company’s debt service capability declined significantly. At the end of Q2FY25, its DSCR was 2.05 times, down from 4.39 times at the end of Q2FY24. 

Return on Capital Employed (ROCE): At the end of FY24, the company’s ROCE was 6.85%. 

NHPC Share Price Analysis

NHPC shares were listed on 1 September 2009, and they were oversubscribed nearly 24 times. After their listing, investor response was muted, and the stock traded in a range-bound fashion below its IPO price for more than 10 years. 

On 15th July 2024, the NHPC share price reached an all-time high level of ₹118.40.  In the last three years, the NHPC share price made a remarkable turnaround and became a multibagger stock, growing by 37% annually. 

NHPC has a consistent dividend payment track record. Over the years, it has distributed more than 50% of its net profit as dividends to shareholders. In FY24, the dividend payout percentage was 53% of its net profit. 

In FY24, it paid ₹1.90 as dividend per share, ₹1.85 in FY23, and ₹1.81 in FY22.  At the current NHPC share price of ₹79, the dividend yield ratio is 2.40%.

NHPC Share Price Valuation Score

Earning Per Share (EPS)

The following is the last five years Earnings Per Share of NHPC:

The company’s EPS growth has been moderate during the last five years and even decreased in the most recent fiscal year. It is important to note that a company’s share price rise is directly proportional to its earnings growth.

Price-to-Book VS Median Price-to-Book

The price-to-book value of NHPC’s share price is 2, while the 5-year median price-to-book value is 2. This indicates that the stock is trading at two times the book value compared to its historical averages. 

Price-to-Equity VS Median PE

The current PE ratio of NHPC is 26.7, meaning investors are paying 26.7 times for every ₹1 of earnings. 

However, looking at the PE ratio in isolation doesn’t tell the full story. Therefore, we will compare it with a 5-year median PE.

As per data from the screener, the company’s 5-year median PE is 9.3. This means that at its current PE level, the stock is not trading at a premium compared to its historical valuations. 

Because the stock was trading sideways with no major upside momentum following its IPO, the median long-term PE is low, and after the recent surge, the stock appears overpriced.

Comparing the stock PE to a peer firm will provide a more accurate estimate of stock valuations.

For example, SJVN Ltd., a state-owned hydropower generation business, trades at a PE of 45.7 times and has comparable financial metrics. This indicates that NHPC sells at a lower premium than its peer, SJVN.

NHPC Future Growth Outlook

The nature of its business restricts NHPC’s pursuit of aggressive growth in the hydropower segment. However, its recent diversification to solar and wind energy businesses provides the company with new growth opportunities.

Factors to look out for that could drive the earnings of the company:

Expansion Plans: The company has 10,402 MW of hydro and solar projects under various stages of construction, 4,112 MW of projects awaiting clearance, and 4,110 MW under survey & investigation, providing a long-term growth runway.

Flat revenue growth: In the last five years, the company’s compounded annual revenue growth has been 1%. A longer project execution timeline and flat revenue growth are key risks for NHPC’s share price growth. 

The company’s operating margins are high, but due to the capital-intensive nature of the business and higher non-classified expenses, the net earnings margin is lower. A boost in earnings per share is crucial for the long-term growth of its shares. 

Favorable Government Policies: In a bid to achieve 500 GW of renewable energy capacity by 2030, the government is supporting renewable energy companies through various policy initiatives, helping them grow and strengthen their balance sheets. 

Environmental and Hydrological Risks: Adverse weather conditions, unfavorable hydrology, and variations in water flows can affect power generation and the company’s operational performance. 

Regulatory Risks: Changes in regulatory regulations, particularly tariff adjustments, can impact NHPC’s revenue and profitability. While producing stable returns, the cost-plus tariff regime is subject to regulatory changes.

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

FAQ

This railway multibagger stock has caught everyone’s attention in the market. IRFC share price has reached an all-time high of ₹229 on 15th July 2024, rising more than 800% since its IPO in January 2021. And, investors continue to bet heavily on this stock. 

IRFC stands for Indian Railway Finance Corporation, and its primary task is to meet Indian Railways’ financial requirements by borrowing funds from financial markets. In short, IRFC is a funding arm of Indian Railways. 

In this article, we will analyze the IRFC share price and delve deeper into its financials. Let’s start. 

What does IRFC do?

IRFC is a public sector enterprise under the administrative control of the Ministry of Railways. It was incorporated on 12th December 1986 as a dedicated financing arm of Indian Railways to mobilize funds from domestic and overseas markets. 

Its primary business is to finance the acquisition of rolling stock assets of Indian Railways including locomotives, passenger coaches, wagons, electric multiple units and leasing these assets to other entities under the Ministry of Railways. 

All of these assets are leased for up to 30 years and lease rentals serve as the primary source of revenue for the company. The lease is divided into blocks of two 15-year periods. In the first 15 years, the lessee pays the principal amount for the leased assets, followed by a rent of ₹1 lakh per annum for the remaining 15 years, or until the asset is sold off before the lease period ends. 

So far, IRFC has funded the acquisition of 13,764 locomotives, 76,735 passenger coaches, and 2,65,815 wagons, accounting for approximately 75% of the total rolling stock fleet of Indian Railways. 

It is also lending to other railway entities like RVNL, Railtel, Konkan Railway Corporation Limited, and Pipavav Railway Corporation Limited, etc. 

IRFC raises funds through issue of both taxable and tax-free bonds and term loans from banks and financial institutions. 

IRFC Management Team

Smt. Usha Venugopal is the Chairman and Managing Director of IRFC from 1st August 2024. She is an Indian Railways Account Service (IRAS) officer of 1987 batch and has over 35 years of experience handling various key roles in the Ministry of Railways. 

Ms. Uma Ranade is the CEO and Railway Board has given her additional charge of CMD. She is a 1986 batch IRAS officer with over 35 years of experience in various Railway divisions and the Ministry of Railways. 

Ms. Shelly Verma is the Director (Finance) of IRFC. She holds B.Com degree from Shri Ram College of Commerce, Delhi and is a fellow member of ICAI. Prior to joining IRFC, she was with Power Finance Corporation as Executive Director (Finance) and has more than 30 years of experience in power sector financing. 

Shareholding Pattern

The shareholding pattern shows that mutual funds and other institutional investors own a small stake in the company.

The company’s free-float is close to 14%, which means that only 14% of its shares are available for trading. When compared to IRCTC, the free float is nearly 38%.

When demand for shares rises, a lower free float frequently causes a sharp increase in share price.

IRFC Financials

Total Income

In FY24, the company’s total income increased by 12.2% to ₹26,656 crores from ₹23,763 crores. 

And, in the first half of FY25, IRFC’s total income increased marginally by 1.7% to ₹13,666.22 crores from ₹13,437.93 crores. 

Net Profit

In FY24, net profit of the company increased by 4% to ₹6,412 crores from ₹6,167 crores.

And, in H1FY25, IRFC’s net profit increased by 3% to ₹3,189.47 crores from ₹3,095.86 crores. 

Asset Under Management

Asset Under Management or AUM reflects the total market value of all assets that the company manages for its clients. In IRFC’s case, Indian Railways is the primary client. 

At the end of FY24, IRFC managed assets worth ₹4.64 lakh crores and at the end of H1FY25, AUM marginally declined to ₹4.62 lakh crores.

Asset Quality 

IRFC is one of the few NBFCs in India with no NPAs. This is because all loans are guaranteed by the Indian government, allowing it to operate with a low-risk business model and borrow funds at low rates. 

Also, the Government of India has exempted IRFC from paying any income taxes. 

IRFC Share Price Analysis

IRFC shares were listed on 29th January 2021 and made a quiet start around its IPO issue price. Eventually, IRFC share price exploded to make an all-time high of ₹229 on 15th July 2024, around 9 times its listing price. 

As of 15th November 2024, IRFC market cap stands at ₹1,82,515 crore and is trading at ₹140 per share. 

IRFC has a good dividend payment history. In 2021, the dividend per share was ₹1.43, ₹1.5 in 2023, and ₹1.5 in 2024.

As of 15th November 2024, the dividend yield of IRFC stands at 1.07.

Earning Per Share (EPS)

EPS is an essential metric to assess whether a company is enhancing its profitability per share over time. Consistent flat EPS growth suggests that the company isn’t generating sufficient profit for its shareholders.

The following is the last five years EPS of IRFC.

Over the last five years, IRFC reported a marginal increase in EPS. Consistent growth in earnings is important for rise in share price. 

Return on Equity (ROE)

Return on Equity is calculated by dividing the net profit by shareholder’s fund or equity. 

The following is the last 5 years ROE of IRFC:

The five year average ROE of IRFC is 13.20%. 

A consistent ROE of 15% or higher is generally considered good as it indicates that the company is effectively using shareholder’s equity to generate profits. 

Return on Assets (ROA)

Return on assets is another profitability metric that is especially important for banks and NBFCs, which have an asset-heavy balance sheet. It is calculated by dividing net profit by total assets. 

The following is the last five year ROA of IRFC. 

The five year average ROA of IRFC is 1.29.

A ratio of more than one indicates that a company is generating more profit than the value of its assets. 

Price-to-Book VS Median Price-to-Book

For banking and NBFC stocks, the price-to-book ratio is the more appropriate ratio to measure valuations.

IRFC is trading at a price-to-book value of 3.5 times, while the 5 year Median Price-to-book value is 0.9 times, which means, it is trading at higher valuation compared to historical averages. 

Future Growth Potential of IRFC

The growth of IRFC is dependent on the growth of Indian Railways and its ability to raise low-cost funds.

In FY25, the Government of India has allocated a record ₹2.62 lakh crore in capex, a significant increase from ₹28,174 crores in FY14. The money will be spent on modernization of Indian Railways, new infrastructure development, and improving passenger safety and experience. 

Recent developments, such as the introduction of Vande Bharat train sets and Vande Bharat Sleeper train sets, the conversion of train rakes from ICF to LHB coaches, the transition to a fully electrified network, and the Dedicated Freight Corridor, have all contributed to an increase in demand for rolling stock within the Indian Railways.

The India’s railway and metro rolling stock market is expected to reach ₹4.75 lakh crores in the next five years, growing at a CAGR of 46%, showcasing huge growth potential for IRFC. 

One of the biggest advantages of IRFC is its low risk business model and predictable business growth. Recently, it has diversified its lending activities to financially viable project financing, And, it is the sole player in its business, giving it a long runway of growth.

However, in the event of unfavorable policy changes by the Ministry of Railways, it can adversely impact the growth of the company and IRFC share price. 

FAQ on IRFC Share Price

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

Introduction:

The Public Sector Undertaking (PSU) bank sector is a key part of India’s banking system, comprising banks where the government holds a majority stake. This ownership ensures that these banks operate in the public interest. The growth of PSU banks aligns closely with national economic policies and efforts toward financial inclusion. The ongoing reforms and the government’s push for digital banking in 2024 have positioned PSU banks to adopt new technologies that enhance their services and operational efficiency. This growth is reflected in the NIFTY PSU Bank index, highlighting the sector’s positive trajectory.

Source: NSE

To make the best out of this growth, you can either invest in the index itself or a PSB like the Canara Bank. But before deciding on the investment, let’s take a look at the Canara Bank stock rate and use fundamental analysis to evaluate the Canara Bank stock price. 

Canara Bank Overview:

Canara Bank, known for its customer-centric approach, was established in July 1906 in Mangalore, Karnataka. Over its more than a century-long journey, the bank has experienced significant growth, especially after nationalization in 1969, which propelled it into a national player with extensive geographical reach and diverse clientele. The 1980s marked a period of business diversification for the bank. In June 2006, Canara Bank celebrated a century of operations in the Indian banking sector and later merged with Syndicate Bank in April 2020.

Today, Canara Bank is a major financial conglomerate with thirteen subsidiaries and sponsored institutions. It serves over 11.42 crore customers through a vast network of 9,627 branches and 12,256 ATMs across India. As of June 2023, it holds a market share of 6.2% in net advances and 6.5% in total deposits. The bank excels not only in commercial banking but also in corporate social responsibility. It focuses on national priorities, promotes rural development, and enhances self-employment through training institutes while advancing financial inclusion.

Canara Bank has consistently maintained a balanced asset mix, emphasizing sectors like agriculture and Micro, Small, and Medium Enterprises (MSMEs) alongside retail assets such as housing, education, and vehicle loans. As of March 2024, the bank’s capital adequacy ratio stood at 16.28%, well above the regulatory requirement of 11.5%. In FY 2023-24, it raised infrastructure bonds to diversify funding sources, totaling Rs.10,000 crore at competitive rates.

Shareholding Pattern:

The shareholding pattern of Canara Bank as of the quarter ending September 2024 is as follows-

Source: Company Report

Key Management Personnel:

Canara Bank was started by Shri Ammembal Subba Rao Pai in 1906. As of the financial year ending March 2024, the bank operates under the leadership of the following key management personnel:

1. Shri Vijay Srirangan (Non-Executive Chairman):

Shri Vijay Srirangan, a Gold Medalist from IIM Ahmedabad (PGDBM) and IIT Delhi (B.Tech), brings extensive experience to his role since November 2022. He was the Director General and Mentor at the Bombay Chamber of Commerce & Industry. Previously, he spent 36 years with Tata Group, serving in leadership roles at Tata Consultancy Services, Tata Infotech, Tata Unisys, and Tata Burroughs. His responsibilities ranged from training and research to international sales and systems integration.

2. Shri K Satyanarayana Raju (MD and CEO):

Shri K. Satyanarayana Raju, a Physics graduate with a postgraduate degree in Business Administration (Banking and Finance), began his banking career in 1988 at Vijaya Bank. He rose to Chief General Manager at Bank of Baroda, leading branches and serving as Zonal Head of Mumbai. He also held key roles in operations and services at the head office and was on the board of BoB Financial Solutions Limited. Currently, as Executive Director of Canara Bank since March 2021, he oversees various functions, including IT, digital banking, MSME, and corporate credit. 

3. Dr. Parshant Kumar Goyal (Director representing the Government of India):

Dr. Parshant Kumar Goyal, IAS, serves as Joint Secretary in the Department of Financial Services, Ministry of Finance, focusing on Financial Inclusion and Digital Payments. Earlier, as director of the same department, he handled agriculture credit and regional rural banks. He has also served as Secretary to the Chief Minister of Tripura, managing additional portfolios in the GA (C&C) and Industries & Commerce departments.

Canara Bank Financials:

1. Operating Profit:

Operating profit reflects the income generated from its core activities like lending, deposits, and other financial services, minus the operating expenses such as salaries, rent, and administrative costs. As of the financial year 2023-24, the operating profit for Canara Bank was Rs.29413 crore. The trend of operating income over the last few years is as under-

Source: Annual Report

2. Net Profit:

One of the primary measures of profitability, the net profit, for Canara Bank has been increasing since the bank incurred losses in 2019-20. As of the financial year 2023-24, the net profit of the bank was Rs.14554 crore. The trend of net profit over the last few years is as under-

Source: Annual Report

3. Net Interest Income:

Net Interest Income represents the bank’s profitability earned through its core activities. As of the financial year ending March 2024, the bank’s net interest income stands at Rs.36566 crore, which was 16.32% more than the NII of FY2023 (Rs.31435 crore). The trend for the NII of the bank over the last few years is as under-

Source: Annual Report

4. Deposits:

Deposits are a major source of funding for a bank, representing the money customers leave in savings, checking, or fixed accounts. For a bank, a growing deposit base means it has a larger base for lending, and its ability to generate income is good. A stable deposit trend indicates consistency and a lower base could signal a doubt in the bank’s ability to lend and earn. As of the financial year 2023-24, Canara Bank received a total deposit of Rs.22,72,968 crore, of which the CASA deposits were Rs.392327 crore, 7.06%. The trend for deposits received by Canara Bank over the last few years is as under-

Source: Annual Report

5. Advances:

Advances refer to the loans and credits extended by a bank to its customers. Interpreting a bank’s advances reveals the bank’s risk exposure and profitability. Higher advances indicate active lending and is considered positive when driven by a healthy demand and good credit quality. However, this needs to be examined in combination with risk management and the bank’s NPA. As of FY2024, Canara Bank’s advances stood at Rs.960602 crore. The trend for advances as per the bank’s loan book over the last few years is as under-

Source: Annual Report

Key Financial Ratios for Canara Bank:

• Capital Adequacy Ratio: The bank’s capital adequacy ratio is 16.28%. This means that for every Rs.100 of risk-weighted assets, the bank has Rs.16.28 in capital. The ratio highlights the bank’s healthy cushioning for organic growth in the forthcoming quarters and the bank’s ability to absorb potential losses.
• Net NPA Ratio: The net NPA ratio is 1.27%, meaning that out of every Rs.100 lent, Rs.1.27 is classified as non-performing. A lower NPA ratio shows effective credit management and a lower risk of bad loans.
• Return on Equity: The return on equity is 22.06%. This indicates that for every Rs.100 of equity invested by shareholders, the bank generated Rs.22.06 in profit, reflecting strong profitability.
• Return on Average Assets: The bank’s RoAA is 1.01%. This means that for every Rs.100 of assets, the bank earned Rs.1.01 in profit. A higher ROAA shows better asset utilization.
• Net Interest Margin: The net interest margin is 3.05%, meaning that for every Rs.100 of interest-earning assets, the bank earns Rs.3.05 in net interest income. A higher NIM shows the bank’s efficiency in earning from its lending activities.
• CASA Ratio: The CASA ratio for Canara Bank is 32.29%. This means that 32.29% of the bank’s total deposits come from low-cost current and savings accounts, reflecting a stable and cost-effective source of funding for the bank.

Source: Annual Report

Canara Bank Share Price Analysis:

A registered investment advisor evaluates a company share using analysis techniques and a stock screener. Canara Bank was listed on the NSE in December 2002. Since then, the stock has generated gains of over 900%. As of 24th October 2024, the market cap of Canara Bank stands at Rs.89,101.01 crore, and its share price stands at Rs.98.22, more than the Bank of Maharashtra share price (Rs.50). 

Source: MoneyControl

Over the last twelve months, the stock has grown 38.07% as of 24th October 2024. It has surpassed the growth levels of the major indices NIFTY50 (26.42%) and SENSEX (23.92%). 

FY2024 Performance Highlights of Canara Bank:

• The bank’s global business grew by 11.31% in FY 2023-24, reaching Rs.22,72,968 crores, with global deposits increasing by 11.29%.
• Its retail portfolio saw an 11.68% growth, reaching Rs.1,56,414 crores. Housing loans rose by 10.81% to Rs.93,482 crores, vehicle loans by 14.03% to Rs.17,251 crores, and education loans grew by 6.65% to Rs.15,726 crores.
• Advances to agriculture and allied activities increased by 18.69%, reaching Rs.2,53,206 crores, while advances to the MSME segment grew by 6.67% to Rs.1,31,869 crores by March 2024.
• The bank’s yield on advances rose by 101 basis points, from 7.70% in March 2023 to 8.71% in March 2024.
• In January 2024, Canara Bank inaugurated its Data and Analytics Center (DnA) in Bengaluru, setting a benchmark in the Indian banking sector.
• The bank introduced API Banking to provide seamless digital banking services for corporate customers.
• Canara SHG E-money, a unique digital initiative in partnership with the Reserve Bank Innovation Hub, now offers doorstep digital services to Self-Help Groups (SHGs).
• The bank has partnered with NEC Corporation and HPE for Data Lake House implementation and with Microsoft for establishing an Advanced Analytics Platform and Data Lake in the cloud.

Source: Annual Report

Bottomline:

In FY2024, Canara Bank introduced API banking for corporate customers and launched Canara SHG E-money with the Reserve Bank Innovation Hub. Embracing digital transformation, it uses advanced analytics and cloud-based solutions to enhance customer service. The bank aims to increase low-cost deposits by offering innovative, customized products, striving to be recognized as the “Best Bank to Bank With.” Investing in Canara Bank could be a way to participate in the growth of India’s banking sector. However, when deciding whether to invest in Canara Bank or another option, remember to consider fundamental analysis vs. technical analysis. Use a stock screener to compare your investment choices with your financial goals. If necessary, consult a registered advisor for guidance.

FAQs

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

Tata Tele (Maharashtra) Limited (TTML), Tata Group’s telecom arm, offers a wide range of enterprise telecommunications services, both wired and wireless. It provides services under the name Tata Tele Business Services (TTBS).

Incorporated on March 13th, 1995, Hughes Ispat Limited secured essential telecom licenses to offer cellular services in the Maharashtra region. In December 2002, the company was acquired by Tata Group and renamed Tata Tele Maharashtra Limited. 

The company has been struggling to achieve growth due to rising competition. However, with Tata Sons infusing nearly ₹60,000 crore for debt payments in the past six years, could this become a turnaround stock? Let’s dive into the analysis of TTML share price.

What does TTML Do?

Operating under the Tata Tele Business Services (TTBS), it offers connectivity and communications solutions for businesses in Maharashtra and Goa. 

TTBS offers India’s businesses the most extensive information and communication technology (ICT) services, including connectivity, collaboration, cloud, security, IoT, and marketing solutions. 

The company also operated a consumer mobile business, partnering with Docomo and Tata Teleservices, but it later suspended operations due to unsustainable competition. On July 1, 2019, it sold its consumer mobile business to Bharti Airtel.

TTML Business Overview

The company has a fiber optic network of over 1.3 lakh KM, offering a comprehensive portfolio of smart digital solutions. It includes

• Cloud Infrastructure
• Cybersecurity Solutions
• Managed Services
• Business Communications
• Network & Connectivity
• Communication Suite for Collaboration & Productivity

TTBS primarily focuses on catering and empowering micro, small, and medium enterprises spanning various industries. 

TTML Management Team

Mr. Amur S. Lakshminarayanan is the TTML’s Chairman and a Tata Group veteran. And has also been MD & CEO of Tata Communications since November 2019. He is an engineering graduate from BITS Pilani. Before joining Tata Communication, he was President and CEO of TCS, Japan. 

Mr. Harjit Singh is the Managing Director and CEO of TTML and is responsible for the company’s growth and expansion as a leading digital service provider in the MSME category. He is also a Tata veteran and has been associated with companies such as Tata Housing, Tata AutoComp Systems, Tata Communication, and Neotel before joining TTML in 2019. 

Mr. Shinu Mathai is the Chief Financial Officer of TTML and joined the company in March 2004 and worked in various leadership roles. 

TTML Shareholding Pattern

The company’s shareholding pattern has not changed significantly over the last year, and no mutual funds have invested in it. 

TTML Financial Performance Review

Revenue From Operations

In the last four financial years, TTML’s revenue from operations has grown at a lower single digit of 3.37% annually. In FY24, the company posted ₹1,191.65 crore in revenue from operation, up from ₹1,106.7 crore in FY23. 

In Q1FY25, the company’s revenue from operations increased by 13.31% year-over-year to ₹323.50 crore from ₹285.51 crore in Q1FY24. 

EBITDA

The company’s EBITDA rose marginally in the last four years, from ₹500.3 crores in FY21 to ₹536 crores. The EBITDA margin is maintained at 45%. 

In Q1FY25, the company’s EBITDA was reported at ₹138.53 crores, up from ₹127.20 crores in Q1FY24.

Profit After Tax

Because of higher interest expenses, the company is reporting losses which are greater than its revenue.

The company reported a net loss of ₹323.40 crore in Q1 FY25, compared to a loss of  ₹301.18 crore in Q1 FY24.

TTML Key Financial Ratios

Current Ratio: The company’s ratio deteriorated in FY24 to 0.54 times from 0.64 times in FY23. 

Debt-to-equity Ratio: The debt-to-equity ratio has stayed constant at 1.04 times for the last two financial years. 

Interest Service Coverage Ratio: This metric measures the company’s ability to pay its debt interest costs. It has deteriorated to 0.80 times in FY24 from 0.85 times in FY25, indicating that the company is falling short of meeting interest costs in a financial year. 

Debt Service Coverage Ratio (DSCR): Similar to the interest service coverage ratio, this ratio indicates a company’s ability to repay debt. In FY24, DSCR was 0.08 times, improving marginally from 0.06 times in FY23. It suggests the company lacks enough financial means to repay its debt. 

TTML Share Price Analysis

The company has not created wealth for its investors. Tata Tele was listed on the stock market in October 2000, while its previous owner still owned it. The IPO’s issue price was ₹12. 

Because of the stiff competition in the telecom space following Jio’s arrival in 2016, TTML lost most of its market share due to the closure of its cellular operation, and its share price dropped to the level of a penny stock. However, it bounced back due to the strong performance of its enterprise business. 

TTML share price was trading at ₹2.70 on 14th October 2019 and made a high of ₹290 on 10th Jan 2022. It is currently trading around ₹80 level for quite some time now. 

The company has no history of paying dividends. In August 2013, the company issued bonus shares at a 2:15 ratio, which means that for every 15 shares held, shareholders received two bonus shares.

Tata Tele Maharashtra Limited- TTML Debt Position

TTML’s net debt was ₹19,954 crores at the end of FY24, up slightly from ₹19,825 crore at the end of FY23. 

The interest expenses in FY24 increased to ₹1,621 crores from ₹1,501 crore in FY23. 

Despite its low debt-to-equity and interest service coverage ratio, TTML’s debt profile has been assigned a stable outlook by CARE Ratings. 

Tata Sons, its holding company, continues to provide strong financial support, which has resulted in a stable outlook. It has invested ₹46,595 crore in TATA Tele Business Services (TTBS) and continues to support the company.

Valuations Score

The valuation metric doesn’t apply to TTML because it is a loss-making company. Hence, the Price-to-Earnings (PE) Ratio cannot be calculated. With a negative net worth, the P/B Ratio is also negative. 

Market Cap to Sales

The company’s market cap-to-sales ratio is around 13 and is trading close to its 5-year median, which indicates that it is neither overvalued nor undervalued in these valuation metrics. 

However, it would help if you compared TTML share price with that of peer companies and analyzed the valuation metrics. 

Industry Outlook

India is the second-largest telecom market in the world, with a teledensity of 85.87% at the end of May 2024. According to IBEF, the total number of telephone subscribers stood at 1,203.69 million, and Wired broadband subscribers stood at 41.31 million.

The percentage of digital penetration in the MSME sector is still lower. According to a report by Redseer, India is home to about 64 million MSMEs, contributing 30% to the nation’s GDP. However, the current digital penetration among MSMEs is 12%, which opens up many opportunities for players like TTML. 

To make MSME more digitally empowered, the Government of India has launched the Digital MSME Scheme for the increased adoption of digital tools, applications, and technologies. The government will provide subsidies to MSME units for using cloud-based software,

All these factors can offer a considerable growth potential for TTML stock price. 

Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as a recommendation or investment advice by Equentis – Research & Ranking. We will not be liable for any losses that may occur. Investments in the securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL & the certification from NISM in no way guarantee performance of the intermediary or provide any assurance of returns to investors.

FAQ

Introduction:

The rising middle class and the increasing youth population are leading to a high demand in India’s automobile sector. The indicative index, NIFTY Auto’s yearly gains of 51.71% as of 18 October 2024, shows the sector’s growth and also reflects a growing investment opportunity in the automobile manufacturing industry. 

The industry opportunity can be leveraged by investing in automobile manufacturing companies like Ashok Leyland, India’s second-largest commercial vehicle manufacturer. But what is Ashok Leyland share price? How stable is the company, and what does the fundamental analysis of Ashok Leyland say? Let’s find out. 

Overview of Ashok Leyland Limited:

Ashok Leyland is the Hinduja group’s flagship company, with a strong presence in the medium and heavy commercial vehicle (M&HCV) market. It ranks as the fourth largest bus maker in the world and the 19th largest truck manufacturer. Recently, it was recognized as the 34th-best brand in India. Headquartered in Chennai, Ashok Leyland operates nine manufacturing plants—seven in India and one in the UAE and UK.

The company has a broad portfolio in the auto industry with product concepts that set commercial vehicle (CV) benchmarks. In FY24, it held a 31% market share in the M&HCV segment and 20% in the LCV segment. Ashok Leyland also plays a key role in defense, supplying the largest fleet of logistics vehicles to the Indian Army and partnering with armed forces worldwide. Its portfolio includes diesel engines for industrial, genset, and marine uses, along with electric vehicles through Switch Mobility.

The company has one of the largest networks in the commercial vehicle industry, with 52,863 touchpoints, including 1,748 exclusive ones and 11,207 outlets for Leyparts. Additionally, Ashok Leyland runs driver training institutes across India, having trained over 8,00,000 drivers to date. 

Share Holding Pattern:

The shareholding pattern for the company as of September 2024 is as follows-

Key Management Personnel:

Ashok Leyland was founded by Raghunandan Saran in Chennai, where it began as ‘Ashok Motors’. The leadership baton currently lies in the hands of the following executives-

Mr. Dheeraj G. Hinduja (Executive Chairman):

Mr. Dheeraj Gopichand Hinduja earned his B.Sc. (Hons) in Economics and History from University College, London, in 1993. He represents the Hinduja Group, and his expertise includes global business strategies, building and transforming organizations, and attracting top Boards and management talent. 

Mr. Gopal Mahadevan (Director):

Mr. Gopal Mahadevan is a Chartered Accountant and Company Secretary with 35+ years of experience in finance across various industries. He has worked in manufacturing, internet services, financial services, and project companies. Throughout his career, Mr. Gopal has been part of leading organizations like Thermax, Amara Raja Batteries, Sify, Sanmar Group, and TTK Pharma. He also serves on the board of multiple companies within the Ashok Leyland Group.

Mr. Shenu Agarwal (MD & CEO):

Mr. Shenu Agarwal is an NIT Kurukshetra graduate with Honors and holds an MBA from Duke University, USA. He brings over 25 years of hands-on experience in Sales, Marketing, R&D, Product Management, Strategy, Project Management, New Business Start-ups, and Strategic Tie-ups. Previously, he served as the President of Agri Machinery and Construction Equipment at Escorts Kubota Limited.

Ashok Leyland Financials:

Revenue (Gross Sales):

The company’s revenue has been growing steadily since 2020-21. It reached its highest-ever sales revenue of Rs.38,367 crore in FY24, marking a 6% increase from the previous year. This growth came from selling 1,94,555 vehicles, 32,374 engines, and 3,469 spare parts and other items.

EBITDA:

The company’s EBITDA as of FY2024 was Rs.4607 crore, an all-time high level with a 57% growth from FY2023. Additionally, it was Rs.911 crore for the quarter ending June 2024. Over the years, the EBITDA trend for the company has been as follows-

Profit After Tax:

The company posted a record profit (PAT) of Rs.2,617 crore, its highest ever. The previous record was Rs.1,983 crore in FY19. This marks a 90% growth compared to the previous year. As of the quarter ending June 2024, this figure had already reached Rs.526 crore. Over the past few years, the trend in the company’s PAT has been as follows-

Key Financial Ratios for Ashok Leyland:

As of the financial year ending 31st March 2024, the key financial ratios of the company are as follows:

• Current Ratio: The company’s current ratio is 0.96, which means that for every Rs.1 of liabilities, it has Rs.0.96 in assets. A current ratio lower than 1 is generally considered less favorable. 
• Debt-to-Equity Ratio: The company’s debt-to-equity ratio is 0.01, which means that for every Rs.100 of equity, the company has only Rs.1 in debt. 
• Return on Capital Employed: The company’s ROCE is 15%. This means that the company generates a profit of 15 paise for every rupee of capital employed in the business. 
• Return on net worth: The company gave a 30.8% return on its net worth, meaning that for every Rs.100 of equity invested by the shareholders, it earned Rs.30.8 as profit. This indicates an effective use of shareholder funds to generate profits. 
• The company achieved a 31.1% market share in the  M&HCV Bus and Truck segment in FY2024. 

(Source: Annual Report) 

Ashok Leyland Share Price Analysis:

A company’s share price analysis can be done through both techniques; thus, the question of fundamental analysis vs technical analysis doesn’t affect the outcome. Ashok Leyland was listed on the NSE on 25th May 1995. As of 18th October 2024, the company’s share price is Rs.223.40, and its market cap stands at Rs.65,599.79 crore. In the last twelve months, the stock investment advisors have seen the company stock grow 27.15%, lower than the index growth of 52.08% seen in NIFTY Auto. The company stock, however, crossed the NIFTY50 returns of 26.35% and the SENSEX returns of 23.30% as of the same date.  

Key Highlights of Ashok Leyland For FY2024:

• The company’s aftermarket business grew by 28% over the past year. It also climbed to 2nd place in Sales & Service Satisfaction, showing the impact of its customer-focused initiatives.
• In International Operations (IO), the company saw a 5% increase, delivering 11,853 units in FY24, up from 11,289 units in FY23.
• On March 25, 2024, the Board of Directors declared an interim dividend of Rs.4.95 per equity share for the financial year ending March 31, 2024.
• Over the past three years, the company has achieved strong profit growth of 117.9% and revenue growth of 35.85%. It has also maintained a Return on Capital Employed (ROCE) of 21.57%.
• In October 2024, Ashok Leyland secured a contract to supply 180 electric trucks to Group BillionE.

Bottomline:

Ashok Leyland Limited’s shares have a PE ratio of 23.87, which is lower than that of Force Motors share price. The company’s financial performance in FY2024 is comparatively better than in previous years, considering the record sales and revenue generated this year. However, whether to invest in the automobile sector or not, and if yes, whether to choose Ashok Leyland or go with Tata Motors share price, must be decided based on your financial profile and relevant industry factors like market trends and growth rate. 

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQ

Did you know Colgate originally sold soap and perfume before adding toothpaste to their product portfolio? The company’s roots date well before India’s first war of Independence in 1857.

Colgate is more than a company in India; it’s an emotion. The brand has extremely high recall across all age groups and has become synonymous with toothpaste. It’s one of those few companies that have stood the test of time and have grown by leaps and bounds.

In this article, we will understand more about Colgate and Colgate share price. Let’s dive in.

Brief Overview of Colgate

Colgate-Palmolive, as the company is known, was set up by William Colgate in 1806 in New York City. The company was initially called William Colgate & Company and was a soap and candle company.

The company developed and marketed more products over the years, but it is best known for its toothpaste, which it introduced in 1873. Initially, the company sold toothpaste in a jar, and in 1896, it introduced the collapsible tube to sell toothpaste called Colgate Ribbon Dental Cream.

Since then, Colgate has continued introducing a new range of toothpaste, establishing itself as a leading global oral care company serving hundreds of millions of consumers worldwide. In 1928, Palmolive-Peet bought Colgate to create the Colgate-Palmolive-Peet Company, and later, in 1953, Peet was dropped from the title and continued to be known as Colgate-Palmolive Company.

India Entry

Colgate started its operation in India in 1937 with the launch of dental cream. Over the years, it launched its other product range, including shampoo and cold cream, but continued to be known as an oral care company.

Currently, all oral care products are marketed under the Colgate brand, and all other non-oral personal care products, such as hand wash and shaving cream, are marketed under the Palmolive brand.

Business Overview of Colgate-Palmolive

Colgate Palmolive India is a subsidiary of Colgate-Palmolive, a global FMCG company that produces and distributes household, personal care, healthcare, and veterinary products.

In India, Colgate-Palmolive operates only in one segment- Oral, Personal, and Home Care. The oral segment includes toothpaste, toothbrush, mouthwash, toothpowder, and oil-pulling products. In the personal and home care segment, it includes soaps, shampoos, handwash, shower gels, conditioners, shaving products, dishwashing products, house cleaning, etc.

The company has a strong distribution network with a presence in more than 5 lakh villages across India and has three manufacturing units in Goa, Himachal Pradesh, and Gujarat.

Leadership Team

• Ms. Prabha Narasimhan is the Managing Director and CEO of Colgate-Palmolive India and joined the company in 2022 from Hindustan Unilever Limited, where she led the home care category. She has over 25 years of experience in customer development, consumer marketing, and innovation across geographies and multiple categories in the FMCG segment. Ms. Prabha has graduated from IIM-B and Melbourne Business School.
• Mr. M.S. Jacob has been the Whole-time Director and Chief Financial Officer since 2016. He joined Colgate in 1995 and served through multiple leadership roles in Finance across the Southeast Divisions of the company as well as the Asia Pacific Divisions. Mr. Jacob holds a B.Com degree from Mumbai University and is a qualified chartered accountant.
• Mr. Gunjit Jain is the Executive Vice President of Marketing and has been with the company since 2008. He has held roles and responsibilities across customer development, marketing, innovation, strategy, and leadership functions. Mr. Jain holds an MBA from IIFT, Delhi, and a B.Tech from Vellore Institute of Technology.
• Mr. Balaji Sreenivasan has been the Executive Vice President of Human Resources since November 2020 and joined the company in 2005. He has served through multiple leadership roles in the Human Resources function at Colgate’s subsidiaries in India, Turkey, Central Asia, North Africa, Middle Eastern countries, and the Asia Pacific region.

Shareholding Pattern

Financials

Revenue

In FY23, Colgate-Palmolive reported a 2.4% increase in revenue to ₹5,188 crore compared to ₹5,066 crore in FY22. And, in Q1FY24, the net sales of the company increased by 10.8% over the same quarter last year to ₹1,314.7 crore from ₹1,186.6 crores in Q1FY23.

EBITDA

In FY23, the company reported a marginal dip of 1.2% annually in EBITDA to ₹1,547 crores from ₹1,566 crores in FY22.

Profit After Tax

In FY23, the net profit declined by 2.8% to ₹1,047.15 crores, compared to ₹1,078.32 crores in FY22. And, in Q1FY24, the company reported a net profit of ₹273.3 crore, a growth of 30.5% as against the net profit of ₹209.7 crores in the same quarter the previous year.

Key Financial Ratios

Current Ratio: At the end of FY23, the current ratio of the company improved by 4% to 1.43 times from 1.37 times at the end of FY22.

Debt-to-equity Ratio: The company has no long-term debt on its book. The debt-to-equity ratio as of 31st March 2023 stands at 0.04 times compared to 0.05 at the end of 31st March 2022.

Interest Coverage Ratio: The interest service coverage ratio of the company at the end of FY23 was 281.82 times compared to 236.30 times at the end of FY22.

Inventory Turnover Ratio: The company’s inventory turnover ratio improved by 8% to 5.18 times on 31st March 2023, compared to 4.81 times on 31st March 2022.

Operating Profit Margin: The operating profit margin of the company in FY23 was 26%, compared to 27% in FY22.

Net Profit Margin: The net profit margin of the company in FY23 was 20%, compared to 21% in FY22.

Return on Capital Employed (ROCE): The ROCE of the company at the end of 31st March 2023 increased to 84% from 82% at the end of 31st March 2022.

Colgate Share Price Analysis

Colgate has consistently generated compounded wealth for its shareholders over time and has shown the least volatility compared to other stocks in the category. The company has issued bonus shares in the past years and has a consistent track record of paying dividends to its shareholders. It paid dividends of ₹39 in 2021, ₹39 in 2022, and ₹21 in 2023 to its shareholders.

As of 28 October 2023, Colgate share price has grown at a CAGR of 14% and 11% in the last five and three years, respectively. It reached an all-time high level of ₹2,096 on 27th September 2023. The market cap of Colgate Palmolive (India) Ltd. is ₹56,587 crores.

Peer Comparison

Key Highlights

• Colgate is the most prominent oral care company in India, with more than 50% market share in the toothpaste category.

• The company has been ranked India’s most trusted oral care brand for the ninth consecutive year from 2011 to 2019 by the Economic Times- Brand Equity, conducted by Neilsen.

• For the quarter that ended on 30th June 2023, the company reported the highest-ever quarterly revenue growth in recent times, driven by early signs of recovery in the rural market. The toothpaste category witnessed double-digit sales growth during the period.

• The company is focusing on the premiumization of toothpaste products, which has been the cornerstone of its growth strategy. Total Sensitive Toothpaste, CLGT water flosser, Visible white O2 TP & Whitening Pen, and Colgate Periogard Toothpaste are all expected to contribute to long-term revenue growth.

• There is enough headroom for growth in the toothpaste category as the company, through its multiple awareness programs, focuses on increasing the frequency of brushing in India. 55% of rural households don’t brush daily, while only 20% of urban households brush twice daily.

• The per capita toothpaste consumption in India is low compared to other developing nations like Brazil, the Philippines, etc. Brazil’s per capita consumption of toothpaste is 3X more than what Indians consume annually.
• The company has also increased its focus to grow hand and body wash products under Palmolive brands faster than the average growth rate, given its low market penetration of 2%.

Brief Industry Overview

• The size of the Indian oral care market in 2022 was around $641 million in 2022 and is expected to expand at a CAGR of 9.2% between 2022 and 2030 to reach around $1.3 billion, according to insights10 report.

• With oral issues becoming more prevalent in India with changing lifestyles, increased consumption of sugar in daily diet, and living standards, demand for oral hygiene products will increase.
  
• The National Oral Health Programme (NOHP), the flagship program of the Government of India, will also contribute to expanding oral hygiene in India. This program aims to improve oral hygiene standards in India, provide accessible, affordable, and high-quality health care, and reduce morbidity associated with oral disease.
  
• With the entry of new players, the oral care industry is experiencing increased competition among players, which reduces pricing flexibility. Colgate benefits from its parent company, which has a strong R&D capability and can launch new and innovative products at greater speed.

FAQs

Have you ever noticed how everyday items have become more comfortable in recent years, with ergonomic designs that feel right in your hand? Or the increasing reliability of our communication networks and healthcare systems?

The combination of design and technology has helped companies create innovative products that are easy to use and positively impact people’s lives. And companies like Tata Elxsi play a considerable role. The world’s leading provider of design and technology services across industries.

In this article, we will do a company analysis of Tata Elxsi Ltd. and check out its share price history.

Overview of Tata Elxsi Ltd.

Tata Elxsi commenced its business on 5 May 1989 in Bangalore and is mainly involved in developing and promoting electronics, embedded systems, and software applications. Over the years, it has evolved its business structure and offering and is recognized as a premium engineering service provider globally.

The company operates across various industries and offers a diverse set of services, such as:

Product Design and Engineering: The company helps its clients develop innovative and aesthetically designed products across industries such as automotive, healthcare, consumer electronics, railways, and more. It offers mechanical design, 3D modeling, simulation, and prototyping to develop physical products and components.

Embedded Systems and Software: Tata Elxsi specializes in developing embedded software and firmware for different applications. Embedded software and firmware is a type of software that controls hardware devices but not computers. For example, remote controls, in-vehicle computers, digital cameras, IoT devices, etc. It offers software for testing and quality assurance services for checking the performance and reliability of software and embedded systems.

Automotive and Transportation Solutions: It assists companies in product design and development, including interior, connected systems, infotainment systems, etc., and advanced systems related to autonomous vehicles, electric mobility, etc.

Broadcast and Communication: In the broadcasting and media industry, it offers services, including content creation, digital transformation, and streaming solutions.

Similarly, in the communications segment, it provides services like infrastructure design, network management, signal processing, and wireless protocol solutions for telecom operators.

Healthcare and Life Sciences: It offers design and development of medical devices, healthcare software, telemedicine solutions, healthcare IT services like electronic health record (EHR) implementation, data analytics, etc.

Tata Elxsi also leverages Artificial Intelligence (AI) and Machine Learning (ML) to develop solutions for various industries, such as predictive maintenance, data analytics, voice and speech recognition, etc. It also offers services to the Aerospace and Defense industry, semiconductors, etc.

Also Read: Top Semiconductor Stocks in India

Tata Elxsi Business Overview

As defined in the Accounting Standard 108- operating segments, the company has identified two business segments:

• Software Development & Services
• System Integration & Support Services

In FY23, Tata Elxsi reported a total revenue of ₹3,218.5 crores and has earned a significant share of the revenue from the transportation vertical, followed by media & communication and healthcare.

Tata Elxsi Management Team

Tata Elxsi has a workforce of over 12,000 people spread across 16 countries. The company is led by:

• Mr. Manoj Raghavan, who is the Managing Director & CEO. He has been with the company since 1997 and began his career with the Tata Group in 1993 as a Graduate Trainee Engineer at Tata Motors.
• Mr. Nitin Pai is the CMO and Chief Strategy Officer. He joined Tata Elxsi in 1996 as a product manager and has held various leadership roles in the marketing and design division. Mr. Pai is a Mechanical Engineer from BITS Pilani.
• Mr. Gaurav Bajaj is the Chief Financial Officer at Tata Elxsi. He joined Tata Elxsi in January 2021, previously working for Wipro Ltd. Mr. Gaurav is an ICAI-certified chartered accountant.
• Mr. Philip Mammen is the Vice President- Human Resources and has been with the company since January 2007.

Shareholding Pattern

Tata Elxsi Financial Review

Revenue

In FY23, Tata Elxsi reported a 27.9% year-on-year rise in revenue to ₹3,218.5 crores from 2,515.3 crores in FY22. And, in Q1FY24, total income rose by 18.5% to ₹872.5 crores, from ₹736.2 crores in Q1FY23.

Segment-wise Revenue Breakup

Geographic-wise Revenue Breakup

EBITDA

In FY23, the company reported an EBITDA of ₹961.1 crores, an increase of 25.5% year-over-year, compared to ₹765.7 crores in FY22. The EBITDA margin in FY23 was 30.6%, compared to 31% in FY22. In Q1FY24, EBITDA witnessed a year-on-year growth of 5.6% to ₹251.5 crores from ₹238.2 crores.

Profit After Tax

In FY23, Tata Elxsi Ltd. reported a 37.4% year-on-year rise in net profit to ₹755.2 crores from ₹549.7 crores. In Q1FY24, the company reported a 2.2% increase in net profit to ₹188.9 crores from ₹184.7 crores.

Tata Elxsi Key Financial Ratios 

Current Ratio: At the end of FY23, the current ratio stood at 4.83 times, compared to 4.13 times at the end of FY22.

Debt-to-equity Ratio: The company has no long-term debt, and the debt-to-equity ratio is stable at 0.09 times at the end of FY23.

Net Profit Margin: In FY23, the net profit margin increased to 24.01% from 22.25% in FY22.

Return on Equity (ROE): The ROE of the company at the end of FY23 was 40.97%, compared to 37.23% at the end of FY22.

Return on Capital Employed (ROCE): The ROCE of the company declined slightly to 42.05% at the end of FY23, compared to 43.4% at the end of FY22.

Tata Elxsi Share Price History

Tata Elxsi has given a stellar return to investors, becoming a tremendous success. It launched its IPO in 1995, and from September 1995, the stock has surged from ₹13.5 to reach an all-time high of ₹10,760 in August 2021.

If an investor had invested ₹1 lakh in this stock in September 1995 and remained invested during this period, the value of the stock would have turned more than ₹13 crores today.

The company issued bonus shares in the ratio of 1:1 on 18th September 2017 and has a consistent track record of paying dividends to shareholders. It paid ₹24 in 2021, ₹42.50 in 2022, and ₹60.60 in 2023 as dividends.

As of 27 September, Tata Elxsi share price has given a CAGR return of 45% and 79% in the last five and three years, respectively. The market cap of the company at this date is ₹45,466 crores.

Tata Elxsi Ltd. Company Analysis

Tata Elxsi has experienced remarkable growth since its establishment, continuously evolving to adapt to changing times and shifting customer preferences. Its growth journey over the years is divided into four stages:

Gen 1 was between FY94 and FY03, wherein the company focused on developing system integration services (SI) and Engineering, Research & Development (ER&D).

Gen 2 growth stage lasted from FY04 to FY13; the company launched the Industrial Design business and Visual Computing Labs for visualization and animation.

In the Gen 3 growth stage, which lasted from FY14 to FY19, the company merged the VLC division with Industrial Design, entered the medical electronics business, and achieved leadership in Auto, Media, and Communication.

Gen 4: In its ongoing growth stage from FY20, the company is now focusing on Design-led Engineering for scaling growth. During this period, the CAGR growth in revenue has been 24.5%.

Financial Performance Review

Tata Elxsi is majorly earning from three verticals- Transportation, Healthcare, and Media & Communications.

Transportation

During FY23, The company’s transportation business grew by 32.7% and contributed ₹1,177 crores to the revenue, aided by large deals and growth across segments like EV, software-defined vehicles, and connected cars. The company is a leading provider of transformative technologies for connected, autonomous, and electric cars, with solutions like the AUTONOMIA platform for driverless cars and Tata Elxsi’s e-Cockpit. Besides, it has a vast suite of EV solutions, electric motor solutions, and battery management systems.

Media & Communications

The media & communications division posted 18.5% year-on-year growth, generating ₹1,132.2 crores in revenue. In media, the company has benefitted from the shift towards digital streaming and services. Its award-winning solutions help streaming platforms and media companies stay on top of the game, including content curation. The growing availability of 5G networks has also created an enormous opportunity and has won strategic deals from leading operators from EMEA and a leading multi-system operator in North America.

Healthcare

In FY23, the healthcare division posted strong year-on-year growth of 37.6%, contributing ₹423.5 crore to the top line. The company is offering services in the areas of digital and connected healthcare. And solutions like TEngage and TEDREG help pharmaceutical companies to monitor and capture real-time updates to global healthcare standards.

Key Highlights from Earning Calls

• Deal closure in Q1FY24 has been slow in the transportation segment and affects revenue growth. The management is hopeful of an accelerated deal pipeline closing in the next two quarters.

• The media and communication segment is witnessing a slowdown, affecting revenue growth.

• The healthcare division recorded a sequential growth of 3.4%, a significant improvement over the last two quarters. The company is hopeful to continue the growth momentum in subsequent quarters on the back of good new deals and product wins.
• Operating margins fell 341 basis points sequentially in Q1FY24 to 27.05%, owing primarily to higher employee costs and subcontracting expenses. However, management expects that margins will improve in the coming quarters. This will be driven by increasing employee utilization from 72.5% to 80% and decreasing subcontracting expenses.
• In FY24, the company plans to hire 1800-2000 employees, and despite the uncertain demand outlook, the management is hopeful of strong deal wins and client transformation in the industry.

*Disclaimer Note: The securities quoted, if any, are for illustration only and are not recommendatory. This article is for education purposes only and shall not be considered as recommendation or investment advice by Research & Ranking. We will not be liable for any losses that may occur. Investment in securities market are subject to market risks. Read all the related documents carefully before investing. Registration granted by SEBI, membership of BASL, and certification from NISM in no way guarantee the performance of the intermediary or provide any assurance of returns to investors.

FAQs

Introduction to HAL

Hindustan Aeronautics Ltd. (HAL) is one of the oldest Indian companies specializing in aircraft and helicopter manufacturing and related services, and it plays a strategic role in India’s defense program. It is also one of the world’s oldest and largest aerospace and defense manufacturers.

Let us understand what the company does and analyze the share price of HAL.

HAL Overview

Hindustan Aeronautics Ltd. (HAL) is a government-owned aerospace and defense company. They design, develop, manufacture, and supply aircraft, helicopters, avionics, and communications equipment for military and civil markets. The company was founded in Bangalore in 1940 by Walchand Hirachand and the Government of Mysore to manufacture aircraft in India.
HAL has 20 Production and 10 R&D Centres co-located with the Production Divisions. These divisions /R&D Centres are in ten locations in seven states nationwide.

These divisions are organized into five complexes with current & future operations given below:

• Bangalore Complex (BC): Production and ROH (Repair and Overhaul) of Fixed-wing Aircraft and Engines (Indian and Western origin), Spacecraft Structures, Castings, Forgings, and Rolled Rings.
• MiG Complex (MC): Production and ROH of Fixed-wing Aircraft and Engines (mainly of Russian origin), Civil MRO, and UAV Projects.
• Helicopter Complex (HC): Production and ROH of Helicopters (Indian and Western origin).
• Accessories Complex (AC): Production and ROH of Transport Aircraft. Production and ROH of Accessories and Avionics for Fixed-wing and Rotary wing Platforms (Indian, Russian, and Western origin). Depot Level Maintenance of UAVs.
• Design Complex (DC): R&D of Fixed-wing and Rotary wing Aircraft, Unmanned Aerial Vehicles (UAV), Aeroengines, Avionics, and Accessories.

Hindustan Aeronautics Ltd (HAL) Company Journey

The history and growth of HAL are synonymous with the development of the Aeronautical industry in India for more than 79 years. Here are some of the critical milestones in the company:

●: 1940:The company was incorporated on 23 Dec 1940 in Bangalore by Walchand Hirachand in association with the then Government of Mysore.

● 1941: In March 1941, the Government of India became a shareholder in the company and took over its management in 1942.

● 1951: In January 1951, Hindustan Aircraft Ltd was placed under the administrative control of the Ministry of Defense, Government of India.

● 1963: In August, Aeronautics India Ltd was incorporated as a Company wholly owned by the Government of India to manufacture MiG-21 aircraft under license. Factories were set up at Nashik (Maharashtra) & Koraput (Odisha).

● 1964: Hindustan Aircraft Ltd and Aeronautics India Ltd merged on October 1, 1964, creating Hindustan Aeronautics Ltd (HAL) as per the amalgamation Oder by the Government of India.

● 1971: The Avionics Design Bureau was established in Hyderabad to develop and manufacture components such as IFF, UHF, HF radios altimeters, and ground radars.

● 1973: A design wing was set up in Lucknow to design and develop accessories such as under-carriage and hydraulic systems, static inverters, fuel control systems, etc.

● 1979: The company began manufacturing ‘Jaguar’ aircraft after obtaining a license agreement with British Aerospace and partnering with Rolls Royce-Turbomeca for Adour engines.

● 1982: The company entered into an agreement with the USSR and started production of swing-wing Mig-27 aircraft at the Nasik Division of the company

● 1983: The Korwa Division of HAL in District Sultanpur (U.P.) was established to manufacture the Inertial Navigation System.

● 2000: An independent profit center was established to offer airport-related services in May.

● 2006: A new MRO Division was created in Bangalore to carry out ALH overhaul activities

● 2018: On 28 March, HAL was listed on BSE and NSE

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Hindustan Aeronautics Ltd Management Profile

• Mr. C.B. Ananthakrishnan is the Chairman, Director (Finance) & CFO, and Managing Director of the company. He is a commerce Graduate with a postgraduate degree in Business Administration from Madras University. He received management and leadership training from the Indian Institute of Management in Ahmedabad and the Institut of Aeronautique et. Spatiale (IAS) in Toulouse, France. He is also a member of the Institute of Cost Accountants of India. He has over 35 years of experience in both public and private sectors. He has worked in various industries, including merchant banking, pharmaceuticals, fertilizers, and aerospace. He joined HAL in 2004.
• Mr. Jayadeva E. P. is the Director (Operations) of the company. He holds a bachelor’s degree in Electrical Engineering from the University of Visvesvaraya College of Engineering, Bangalore, and did a Master’s from IIT Madras in Aircraft Production Engineering. He joined the company in 1987 as a management trainee and has about 33 years of experience in Manufacturing, Assembly, Overhaul, Upgrades, Customer support, Indigenisation, and other Management functions.
• Mr. Shailesh Bansal is the Company Secretary and Compliance Officer of the company. He is a fellow member of the Institute of Company Secretaries of India and an Associate Member of the Institute of Cost& Management Accounts of India. He’s also a qualified Chartered Secretary from the Institute of Chartered Secretary and Administrators in the U.K. He has vast experience in both the public and private sectors in managing the overall Corporate Affairs of the companies. He was appointed Company Secretary and Compliance Officer on March 28, 2023. Before this, he worked as a Joint Company Secretary at HAL.
• Mr. Atasi Baran Pradhan is the company’s Director (Human Resources). He holds a Bachelor’s degree in chemistry (Hons.) and a PG in Personnel Management and labor Welfare from Utkal University, Bhubaneswar. He also holds a Bachelor of Law (LLB) from University Law College, Bhubaneswar. He has 35 years of experience in Human Resources, serving in both Public and private sectors with exposure to various industries such as Engineering, Metallurgy, Paper, Aerospace & Defence across India. He joined HAL in 2005.

Hindustan Aeronautics Shareholding Pattern

Financial Analysis of HAL

HAL posted revenue from operations of INR 26,928 Cr during FY23 compared to INR 24,620 Cr during FY22, an increase of 9.37%. On the profitability front, the company has posted a PAT of INR 5,811 Cr for FY23 as against the PAT of INR 5,087 Cr for FY22, an increase of 14.23%.

If we look at the financial performance over the Financial Year 2019 – 2023, the company has posted a Revenue CAGR of 7.71% and a PAT CAGR of 25.45%, which is relatively good. HAL has consistently delivered operating margins (EBITDA %) in the range of 24.67% to 30.95% since 2019.

ROCE

The ROCE of HAL is 31% in FY23, which is relatively good. HAL has consistently delivered ROCE of 24% over the last five years.

HAL Fundamental Analysis

• Hindustan Aeronautics Limited (HAL), a prominent company in India’s defense and aerospace industry, has a robust long-term growth plan supported by a strong order book and promising prospects in the near and long term.
• During this year, the company secured contracts for producing and supplying 70 Nos. HTT-40 Basic Trainer aircraft and 6 Nos. of Dornier 228 Aircraft, respectively. As of March 31st, 2023, the Company’s Order Book position is INR 81,784 Cr.

• The HAL-L&T consortium was awarded an INR 860 Cr contract to develop five Polar Satellite Launch Vehicles (PSLV) for New Space India Limited (NSIL) on September 5, 2022.
• The company continues to develop new platforms, products, and technologies to enhance its capabilities and stay ahead of future technological challenges. These efforts have resulted in major achievements such as successful flights of various aircraft and the development of advanced projects like the LCA Mk II and Indian Multirole Helicopter. This will improve visibility for future platform orders.
• The company spent INR 2,494 Cr on R&D, 9.46% of the turnover. Additionally, INR 539 Cr (15% of Operating PAT) was transferred to the R&D corpus in FY 2023. HAL supplied four Gas Turbines to power INS Vikrant, India’s first indigenous aircraft carrier, commissioned by the Prime Minister in Kochi.
• In FY 2022-23, HAL spent INR 2,081.73 Cr on Capital Expenditure (CAPEX) to maintain infrastructure, develop systems/platforms for Defence Forces, and become Atmanirbhar Bharat. Investments were made towards the Green Field Helicopter project, augmentation of LCA facilities, ROH of SU-30, ROH of AL-31 FP Engine, etc.
  Honorable President of India, Smt. Droupadi Murmu inaugurated HAL’s Integrated Cryogenic Engine Manufacturing Facility (ICMF) in Bengaluru on September 27, 2022. The facility will manufacture rocket engines for ISRO.
• Honorable Prime Minister Narendra Modi dedicated HAL’s new helicopter factory in Tumakuru to the nation on February 6th, 2023, and unveiled HAL’s indigenously designed and developed LUH.
• The Company produced 22 new aircraft and helicopters annually, including LCA Tejas, Dornier Do228, ALH Dhruv, Light Combat Helicopter (LCH), and Light Utility Helicopter (LUH). In addition, it produced 51 new engines and accessories across its various divisions. The Company also overhauled 216 aircraft/helicopters and 535 engines during the year.

HAL Share Price History

HAL was listed on the Indian Stock Exchange on 28 March 2018 at a price per share of INR 1,130 and currently trades at 3,869.25 per share (as of 17 August 2023). HAL has delivered a stupendous three-year stock price CAGR of 46%. Over the last year, HAL’s share price grew 69 %. HAL’s share price is expected to grow over the long term due to its monopoly in the Aircraft and Helicopter manufacturing and service industry.

HAL -What’s Next?

After the COVID-19 pandemic, the Aerospace and Defense (A&D) industry is recovering in both the civil and defense sectors. The defense sector is expected to grow in 2023-24 due to global geopolitical conflicts, as many countries have significantly increased defense budgets to strengthen their military capabilities.

In the civil sector, global passenger traffic has improved significantly in 2022, and it is expected to reach 2019 levels by the end of 2023 or early 2024. This has become a driving factor for large-scale manufacturing orders and aftersales activities in the industry.

As part of the Atmanirbhar Bharat initiative, the Indian government is supporting the growth of domestic industries to decrease defense imports and reliance on foreign OEMs. This will benefit HAL as India’s sole player in this segment.

The company plans to expand its manufacturing unit, production capability, and geographical reach. It also invests in R&D for innovation, doing partnerships with other companies for future growth, thus creating shareholder value.

The company announced it had a strong order book of `81,78,400 lakh and anticipated significant revenue growth from the existing and upcoming contracts.

HAL signed an MoU with Safran to establish a joint venture for developing, producing, selling, and supporting helicopter engines. In March 2022, they signed an MoU with IAI (Israel Aerospace Industries) to convert civil passenger aircraft to multi-mission tanker aircraft.

Key risks:

● Fluctuations in the prices of raw materials and delays in the availability of critical components may affect the execution.
● Allowing private companies into the defense sector could increase competition.
● Change in preference of Defence customers by moving from nomination to competitive procurement.
● Little presence outside India in the export market.
● Dependency on foreign OEMs for supply of critical Components and Spares required for the manufacture and overhaul of Aircraft/ Helicopters

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