Tag: Ratan Tata

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Editorial

TCS Q3 Results Analysis

India’s largest IT company, Tata Consultancy Services (TCS), reported better-than-expected results for the quarter ended December 2020 (Q3). In fact, it was the firms’ strongest third-quarter result in nine years. Despite the negative effects of the Covid-19 pandemic, TCS has been able to comfortably secure its market share in the IT industry. Let us dive into specific details regarding its performance for the October-December quarter. 

Important Q3 Figures

  • TCS reported a 7.18% year-on-year (YoY) increase in consolidated net profit to Rs 8,701 crore. The IT major had posted a profit of Rs 8,118 crore in Q3 of the previous financial year.
  • The company’s consolidated revenue increased by 5.42% YoY to Rs 42,015 crore in Q3 FY21. Its revenue stood at Rs 39,854 crore in the corresponding period in FY20.
Quarterly FinancialsQ3 FY21Q2 FY21Q3 FY20QoQ change(%)YoY change(%)
Revenue (Rs crore)42,01540,13539,8544.75.4
Net Profit (Rs crore)8,7017,4758,11816.47.18
Source: TCS’ Q3 Financial Report
  • Constant currency revenue growth stood at 4.1% QoQ (or 0.4% YoY). [Constant currency refers to a fixed exchange rate that eliminates fluctuations when calculating financial performance figures. Companies with significant operations in other countries often represent their earnings in constant currency terms, since floating exchange rates can often mask true performance]
  • In dollar terms, revenue increased 5.1% to $5,700.6 million during the same period. 
  • The operating margin (or EBIT margin) stood at 26.6%. This is the highest EBIT margin in the last 5 years, even after rolling out salary hikes. [Earnings Before Interest & Tax (EBIT) margin is the ratio of operating income to net sales]
  • TCS has also been able to secure the lowest-ever employee attrition rate in IT Services at (Last Twelve Months) 7.6%. [Attrition rate is measured as a percentage of employees that left a firm over a specific period]
Source: TCS’ Q3 Financial Report

Historically, it is seen that Q3 tends to be a seasonally weak quarter for IT companies. This is due to year-end holidays in the United States and Europe, which are key markets for these companies. However, TCS has completely beaten street estimates and has posted great results during the quarter. The company has also announced an interim dividend of Rs 6 per share. It has fixed January 16 as the record date to determine the eligible shareholders. The payment date of the dividend will be February 3.

Robust Growth and Expansion

Now, let us look at the segment-wise growth of the company in Q3. The revenue growth of TCS was led by the Manufacturing vertical, which grew 7.1%. The Banking, Financial Services, and Insurance (BFSI) vertical showed a sequential growth of 2%. This segment contributes 30% to the IT major’s revenue. Other verticals of TCS that showed improved growth include Life Sciences and Healthcare (+5.2%) and Communications & Media (+5.5%). The North American market, which contributes to half the company revenue, saw 3.3% QoQ growth. 

TCS continued to receive significant orders from prominent companies during the October-December period. Many of its clients embraced digital transformation because of disruptions caused by the Covid-19 pandemic. There was a greater demand for TCS’ cloud-based services as well. 

The company’s total deal wins for the quarter ended December were reported at an impressive $6.8 billion (~Rs 49,915 crore)! In November, TCS agreed to acquire the employees and select assets of Pramerica Systems from insurance giant Prudential Financial Inc. It had also announced the acquisition of Postbank Systems, the IT unit of Deutsche Bank AG- a deal that is estimated to be around $500-$1,000 million (~Rs 3,670 crore-Rs 7,341 crore). These massive deals would help the firm to expand in key European markets.

“Growing demand for core transformation services and strong revenue conversion from earlier deals have driven a powerful momentum that helped us overcome seasonal headwinds and post one of our best performances in a December quarter” – TCS CEO Rajesh Gopinathan.

Conclusion

The Covid-19 pandemic had a substantial effect on almost all IT companies during the first quarter of FY 2019-20. Some companies lost several clients, whereas many others faced a slowdown in sales revenues. Employees were forced to work from home, which initially led to an increase in costs. Despite all odds, the IT sector showed a very strong rebound over the next two quarters. This was primarily due to massive deal wins and clients spending more on cloud computing and artificial intelligence (AI). Technology companies have also been able to cut costs.

The Q3 results posted by Tata Consultancy Services has become a picture-perfect definition of a strong recovery. It has been able to show promising revenue growth across all segments and continues to receive significant orders. They have worked extensively to create better products to meet the demands of all types of clients. At a time when most firms are struggling to cope amidst the Covid-19 pandemic, TCS had even declared salary hikes for its employees in October! The company’s management is confident that TCS will post double-digit growth in the financial year ending March 2022. Interestingly, the stock price is now trading above Rs 3,200, while the recently concluded buyback’s price was around Rs 3,000. Let us look forward to seeing how the IT major plans to further establish its dominance across the globe.

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Market News Top 10 News

CBI Registers Cases Filed by SBI, Canara Bank Over Rs 8,000 crore Fraud – Top Indian Market News

CBI registers cases filed by SBI, Canara Bank over Rs 8,000 crore fraud

The Central Bureau of Investigation (CBI) has registered two separate cases filed by Canara Bank and State Bank of India regarding fraud to the extent of Rs 7,926.01 crore and Rs 313.79 crore, respectively. The first case was registered against a Hyderabad-based private company, its Chairman & Managing Director, additional Directors, and unknown public servants, on a complaint filed by Canara Bank. It was alleged that the private firm had availed credit facilities using multiple banking arrangements. 

The second case was registered against a private company in Chennai, along with its Chairman and Directors, on a complaint by the State Bank of India. It was alleged that the borrower company availed credit limits of about Rs 310 crore from SBI. The loan amounts were said to have been diverted to related parties. 

Read more here.

PM Modi presents ASSOCHAM Centenary Award to Ratan Tata

Prime Minister Narendra Modi presented the ‘ASSOCHAM Enterprise of the Century Award’ to Ratan Tata, who received the award on behalf of the Tata Group. PM Modi stated that ASSOCHAM and the entire Tata group has worked very hard to strengthen India’s economy and help the common Indian. Ratan Tata has been honoured for his distinguished contributions to the country. PM Modi was delivering the keynote address at ASSOCHAM’s Foundation Week. [ASSOCHAM stands for the Associated Chamber of Commerce of Inda].

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Apple puts Wistron on probation, confirms lapses in supplier code of conduct

Apple Inc. has placed Wistron Infocomm Manufacturing Pvt Ltd on probation and has confirmed lapses in Wistron’s supplier code of conduct that led to payment delays for the employees. This comes on the back of the violence last Saturday, when thousands of employees created unrest in Wistron’s facility in Karnataka, over unpaid dues. Apple stated that Wistron will not receive any new business from the company before they complete corrective actions. 

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Apollo Hospitals plans to raise Rs 1,500 crore in next two months 

Apollo Hospitals Enterprises Ltd (AHEL) is planning to raise around Rs 1,500 crore in the next two months to support its inorganic growth and strengthen its balance sheet. The funds will also be utilised to improve the services of Apollo 24/7, the company’s digital health platform. AHEL also stated that it is preparing to acquire specific businesses to strengthen its presence in key markets.

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Vodafone Idea launches Rs 399 digital exclusive prepaid and postpaid plans for new users

Vodafone Idea (Vi) has launched a new Rs. 399 digital exclusive plan for customers who place an order for a new SIM via its website. The new plan is listed under both prepaid and postpaid plans. The Rs 399 plan comes with data benefits. It has a validity of 56 days and offers 100 SMS per day to the users. The plan also comes with 1.5 GB mobile data per day. Additional benefits include access to Vi Movies and TV.

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IIFL Home partners with ICICI Bank to provide affordable housing and MSME loans

IIFL Finance Ltd announced that its home loan subsidiary, IIFL Home, has partnered with ICIC Bank to provide affordable housing and MSME (Micro, Small, and Medium Enterprise) loans. IIFL Home will originate and service customers through the entire loan life-cycle including sourcing, documentation, collection & loan servicing. ICICI Bank will provide funding to these customers

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IndiGrid buys FRV’s solar projects for Rs 660 crore

India Grid Trust (IndiGrid) has entered into an agreement to acquire 100% stakes in FRV Andhra Pradesh Solar Farm-I Pvt Ltd and FRV India Solar Park II Pvt Ltd, from FRV Solar Holdings XI B.V. The two projects comprise 50 MW of solar assets each. The enterprise value of the acquisition is Rs 660 crore. IndiGrid is India’s first listed power sector infrastructure investment trust (InvIT) and is sponsored by KKR and SPGVL.

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Indian banks pursue UK bankruptcy order against Vijay Mallya

A consortium of Indian banks led by the State Bank of India (SBI) returned to the High Court in London for a bankruptcy application hearing against liquor tycoon Vijay Mallya. The banks are pursuing the recovery of debt from loans paid out to his now-defunct Kingfisher Airlines. Vijay Mallya owes more than Rs 9,000 crore to the Indian banks.

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MTAR Technologies files for Rs 650 crore IPO

MTAR Technologies Ltd has filed a draft red herring prospectus with market regulator SEBI for an initial public offering (IPO). The company is likely to raise Rs 600-650 crore through the IPO. It will consist of a fresh issue of up to 40 lakh shares and an offer for sale (OFS) of up to 82 lakh shares of the face value of Rs 10 per share. 

MTAR Technologies is engaged in the manufacturing and development of mission-critical precision components for the nuclear, space, defense and clean energy sectors. The Hyderabad-based company operates 7 manufacturing facilities.

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Punjab National Bank QIP issue falls short of target by 46%

State-owned Punjab National Bank (PNB) was only able to secure 54% of its planned fundraising target through a qualified institutional placement (QIP). PNB had planned to raise Rs 7,000 crore through the QIP that had opened on December 15 (Tuesday). As the issue closed on Friday, it was reported that PNB was only able to raise Rs 3,788.04 crore.

Read more here.

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Editorial

Ratan Tata – The ‘Accidental’ Startup Investor

One of India’s most influential and successful industrialists that we respect and look up to is Ratan Tata. The stories behind his vision for the Tata Group is truly inspiring. His passion for addressing the concerns of all types of sectors is exactly what made the Tata Group so successful. Even after stepping down as the Chairman of the Group in 2012, he continues to amaze us with his intuition for doing business. Ratan Tata has turned into an angel investor for more than a dozen startups. Many people state that he has a ‘Midas Touch’. This means that any firm he invests in turns out to be very successful in their respective fields. Let us take a look at some of the prominent startups that Ratan Naval Tata has invested in.

Snapdeal

The first e-commerce company that Ratan Tata invested in was Snapdeal. In 2014, he made a personal investment in the company. Once he resigned from the chairman post at Tata Group, he saw a huge potential in the virtual or e-commerce world. He wanted to become a part of India’s digital revolution and Snapdeal was the entry point for him. During that period, he became the most high-profile individual investor in India’s highly competitive e-commerce industry.

With investors such as Tata backing them, Snapdeal was able to raise enough funds to undergo a major rebranding process in 2016. The company was able to attract more customers to its website and mobile application through special offers. Tata’s investment in the company not only helped it from losing its market share but also prevented Flipkart’s potential attempt to become a monopoly in the e-commerce segment (after the acquisition of Myntra).

UrbanLadder

The Bengaluru-based online furniture website, UrbanLadder, was launched in 2012. Two years later, they received a major investment from Ratan Tata. This was the second e-commerce venture that he invested in, after Snapdeal. An investment from a business legend such as Ratan Tata gave the company a major boost. The founders of the furniture retail firm stated that Tata, who has a degree in architecture, loved the designs of their products. 

UrbanLadder currently has 3 stores in Bengaluru and distributes its products across 75 cities in India through its website. On November 15, Reliance Retail acquired a 96% stake in the company from its existing investors such as Ratan Tata. However, Reliance was able to buy out UrbanLadder for just Rs 182 crore, which is nearly 1/6th of what it was worth in 2019.

CarDekho

In 2015, Ratan Tata invested an undisclosed amount in Jaipur-based Girnar Software and acquired shares of the company. GirnarSoft is the parent company of CarDekho.com, BikeDekho.com, and PriceDekho.com. Out of these 3, Cardekho is the most popular one. It is one of India’s leading car search ventures that helps users buy cars. The company has tie-ups with many auto manufacturers, more than 4000 car dealers, and numerous financial institutions to facilitate the purchase of vehicles.

It has been reported that Tata’s entry into CarDekho has helped it to scale up geographically. In 2019, the company also launched InsuranceDekho, which was its entry into the motor and health insurance sector. The interest shown by Ratan Tata has allowed the company to raise funds very easily for its expansion plans.

PayTM

Since its launch in 2010, PayTM has had a huge user base. This was due to its features such as multiple payment options. It was a major platform that helped in India’s shift towards digital payments. One97 Communications, the parent company of Paytm, had received support from major investors such as Alibaba in 2015. During the same year, Ratan Tata understood the potential of the company and picked up a stake in One97. This was Ratan Tata’s 5th investment in an e-commerce platform. He even worked as an advisor for the firm.

After 10 years of Paytm’s launch, it has become one of the most widely used applications by Indians. It is also the country’s first payment bank. They have introduced a large number of features such as Paytm Mall, and even has a platform for trading in stocks. Paytm has become a one-stop destination for all payment and shopping needs.

Lenskart

Lenskart, the online retailer that sells eyewear, was able to secure funding from Ratan Tata in 2016. He was inducted as an advisor and mentor for the company. As we know, Lenskart sells sunglasses, eyeglasses, contact lenses, and eyewear accessories. This company was able to improve upon its sales from both online and offline modes. From various sources of funding, the company was able to launch stores in almost all cities in India. They also introduced advanced technology and special offers on its website and mobile application. Thus, they have been able to attract more customers over the years.

Cure.fit

Cure.fit is a health and wellness startup that was launched by the co-founder of Myntra, Mukesh Bansal. Ratan Tata was one of the initial investors of the firm. In 2017, after a year of its launch, the company was able to raise a total of Rs 19.2 crore from Ratan Tata’s UC-RNT Fund and many others. The UC-RNT Fund is a partnership between the University of California and RNT (Ratan Naval Tata) Associates.

Cure.fit has a chain of fitness centers (under the ‘Cult.fit’ brand), a food delivery platform called ‘Eat.fit’, a chain of healthcare clinics called ‘Care.fit’, and an online mental wellness platform called ‘Mind.fit’.

Tork Motors

As we know, electric modes of transport will become the future of commuting in India. This is exactly what Ratan Tata strongly believes as well. In 2019, he chose to invest in Mumbai-based Tork Motors. The e-bike startup had initially raised funds from Bharat Forge and Bhavish Aggarwal (the co-founder of Ola Cabs). Tata analysed the research and development (R&D) activities of the company and was impressed by the work conducted by the team. After Tata invested in Tork Motors, it has received a lot of interest from other investors and bike enthusiasts.

Tork Motors is gearing up to launch its flagship motorcycle, the T6X soon. It reportedly has a top speed of 100 km/h, and a range of 100 km on a single charge. The company has the potential to become one of the best electric vehicle (EV) manufacturers in our country.

Ola Electric

Ratan Tata was one of the first investors in Ola Cabs’ parent company, ANI Technologies Pvt Ltd. However, in 2019, he invested an undisclosed amount in Ola Electric Mobility Pvt Ltd. As mentioned above, he believes in the growth and evolution of the electric vehicle ecosystem in India. The CEO of Ola had stated that Ratan Tata has been an inspiration and a mentor for him in shaping Ola’s journey over the years.

Ola Electric has announced that they will roll out 10 lakh electric vehicles in India by 2021.

What We Can Learn from Ratan Tata

Ratan Tata, in an interview in 2019, said that he became an investor in these new-age startups “by accident”. Whether it was an accident or not, he has helped in providing a major boost to every company he has invested in. We can now see that many of the startups mentioned above have become very profitable over the years. 

His ability to analyse and select these highly interesting companies, since its very inception, is indeed commendable. He invests in those products or services that drives or excites him. He has also invested in popular discount-broker Upstox, which recently hit 2 million users. Tata always looks into how passionate a company’s founders are. He makes it a point to draw conclusions from their attitude and their seriousness towards their company. Moreover, he believes in his own business intuition. 

Despite what background we come from, Ratan Tata has an important lesson for all of us: While making any sort of investment, do remember that each point will be a learning experience. Even while selecting stocks to invest in, make sure that the company and its products excite you. Learn to build trust on your own analysis and become better stock market participants. Thus, your journey towards obtaining financial freedom will become a strong and exciting one.

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Editorial

Mistrys Cut Business Vows with the Tatas After 70 Years of Legacy

Shapoorji Pallonji tata

A few days back, Shapoorji Pallonji Group decided to sell off its 18.4% stake in Tata Sons. The Shapoorji Pallonji Group(SP Group) is headed by Pallonji Mistry and his son, ex-Tata Chairman Cyrus Mistry. The Mistrys and Tatas have been associated with each other for the past 70 years. Their relationship has turned sour in the past few years.

The reason why SP Group and the Tatas were in news was since SP Group which has been hit by a liquidity crunch intended to raise capital by putting their 18.4% stake as collateral. This did not go down well with Ratan Tata. He did not want their stake to go in the wrong hands. A battle followed in the courts. How did Ratan Tata’s relationship with Cyrus Mistry turn sour? Why is SP Group selling its complete stake in Tata Sons? Let us find out what lead the long-time friends turning into foes.

Cyrus Mistry Ratan Tata’s Blue Eyed Boy

Ratan Tata had immense faith in Cyrus Mistry. In fact, it was him who declared Mistry as his successor as Chairman of Tata Sons in 2013. Shortly after he was appointed as chairman, many of his business decisions did not go down well with Ratan Tata. Tata felt that many of Mistry’s decisions were against the ethics and morals of the company and that some of his decisions didn’t do justice to the Tata name. After all, Tatas are admired for their ethics.

Ratan Tata earlier offered Mistry to resign voluntarily, he even asked his close confidante Nitin Nohria, also the Dean of Havard Business School and Director at Tata Sons, to convince Mistry to resign voluntarily. Mistry failed to comply. He was voted out as chairman by the Tata Sons Board on 24 October 2016. Thereafter he was voted out of every possible board, making the bitterness between Ratan Tata and Cyrus evident.

Why does SP Group want to Sell Off Their Stake?

SP Group hasn’t done very well in the past few years. The company has accumulated a lot of debt. The company works mostly in the real estate and infrastructure sector which hasn’t performed well over the past year. When COVID struck, the situation worsened. SP Group currently owes debt worth Rs 28,000 crores.

In the past, SP Group has already pledged a few its shares in Tata Sons to raise a capital close to Rs 1,437 crores. However, SP Group missed the deadline for payment.
This was worth worrying for many at Tata Sons.

Tata’s Worry

While SP Group still owed the debt, it decided to raise capital by pledging shares it has in Tata Sons. They wanted to raise money to finance themselves by keeping Tata Sons shares as collateral. In case SP Group fails to pay, the shares might be transferred to the creditor. This did not go down well with Ratan Tata since he did not want Tata Sons’ shares to go into the hands of an unfriendly investor.

Tata Sons Board approached the Supreme Court. The plea was to restrict the SP Group promoters from raising capital by pledging their shares in Tata Sons. Their plea was that under the company’s articles of association (AoA), the board of Tata Sons has the first right to buy the shares at fair market value. The move shattered SP Group’s hope of raising the capital of Rs 3,750 crores from Canadian Investor Brookefield as well.

Coming To A Common Ground

Recently, SP Group confirmed their intentions of selling their complete 18.4% stake in Tata Sons. SP Group said in an official statement: “a separation from the Tata Group is necessary due to the potential impact this continuing litigation could have on livelihoods and the economy”.

The best-case scenario for SP Group would be to get a fair value for its stake in the Tata’s in order to get their company out of a liquidity crisis. The value of the 18.4% stake which SP Group has in Tata Sons is 1.78 lakh crores or $24 Billion. Such a big amount may not be covered at one-go but in parts, a proposed by Tata Sons.

Apart from a few companies like TCS, none of the Tata Companies have faired well this quarter owing to the COVID-19 pandemic. For Tata Sons, the problem of arranging funds and deciding on the fair value of the purchase still remains. Tata has set up a team for contingency fund planning, which shall decide on how to arrange funds to buy out the stake owned by the Mistrys.

TCS’s buyback has given Tata Sons some relief. Tata Consultancy Services’ buyback of shares has infused close to Rs.11,000 crores in Tata Sons. This gives Tata some liquidity to begin the acquisition in parts if it decides to do so.

Also recently, there were unconfirmed reports about Walmart investing around $25 Million into Tata Group’s proposed ‘super app’, which will bring all of Tata’s Retail channels under a single app. The amount to be invested by Walmart and the amount which Tata shall give to SP Group is a close figure… What do you think is cooking up?