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:

FY20	₹2.99
FY21	₹3.22
FY22	₹3.52
FY23	₹3.82
FY24	₹3.73

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.

FY20	₹3.93
FY21	₹3.66
FY22	₹4.66
FY23	₹4.85
FY24	₹4.91

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:

FY20	11.92
FY21	12.29
FY22	14.85
FY23	13.93
FY24	13.03

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. 

FY20	1.33
FY21	1.16
FY22	1.35
FY23	1.29
FY24	1.32

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. 

	FY23	FY24
Total Borrowings (in ₹ cr)	₹19,825	₹19,954
Interest Expenses (in ₹ cr)	₹1,501	₹1,621

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