Tata Investment Corporation, a Safe Haven for Cautious Investors

[Ed. Note – This article does not meet our new editorial guidelines, nor does the company profiled meet our investment criteria. Both will be removed from the site in the future.]

Tata Investment Corporation Limited (BSE:501301, NSE:TATAINVEST), a midcap investment company (market cap 24050M Rupees), promoted by the well known Tata Group in India, has been a consistent performer for  more than two decades, with an unbroken record of dividend payments and  growing net asset value of investments.

Tata Investment Corporation Limited is promoted by the Tata Group with Tata Sons, the holding company of the group, with a stake of around 61%. Together, the promoter group, inclusive of the blue chip companies, hold 73% and others such as institutions and hold roughly 27%. This company invests in a value driven diversified portfolio of quoted and unquoted securities of different Indian companies, including Tata group companies, which have been engaged in different businesses with a strong history of consistent  operating and financial performance.

The investment strategy of the Company has been to look for a good combination of value and growth. Historically the company was conservative in its approach. While analyzing a security for purchase, it uses conservative accounting norms to determine the fair value of the same. It seeks to invest in companies that show significant growth characteristics with reputed management and a strong competitive position in its industry.

The Company believes that its policy ensures a sustainable advantage in volatile markets, and the portfolio contributes to its dividend and interest income as well as reasonable capital gains that can be realized on sale of investments. It occasionally considers short-term prospects for attractive returns, but the primarily focus is always on sustained long-term value creation.

The company’s main sources of income consist of dividend income, which primarily accrues during June –September quarter, interest income on bonds and profit on sale of investments. It also invests in units of mutual funds, bonds and venture capital funds and unquoted instruments.  While analyzing the receipts, there would be quarter to quarter variation, as sale of investments and receipt of dividends, would not be similar in each quarter. Market value of net assets essentially reflects the performance of the company.

Equity of the company is Rs 551.0 million

Book value: Rs 348.6  last dividend:  210 %

Current market price: Rs 432.2  (Range:  52 weeks: 409 – 535)

Price/Earnings Ratio      :  14.3

CMP/BV     :  432/348.6  = 1.239

CMP/audited NAV  ratio: 432/735 = 0.587

The recent financial results are given below:

Period Q3FY13 (Dec12) Q3FY12 (DEC11) 9 months FY13 (Dec12) FY12 (Mar12) audited
Earnings per share in  Rupees (Face value Rs 10) 5.86 5.67 26.47 29.62
Net Asset value (after tax) per share Rs  (Reflecting the market price of quoted securities) 850 665

Considering the leadership of Tata Investment Corporation and the improvement in market sentiment, between December 2012 and March 2013, a net asset value of 900 is projected for FY 2013, and for March 2014, a net asset value of 950 – 1000 can be projected. Correspondingly, share price for next one year could reach 485, and in FY 2014 it could reach 540 – 580. Downward risk is marginal and only due to political uncertainties during election year. Such opportunities may be used to pick up such stocks at a discount.