What's behind the dream run of Tata Investment Corp?
Shareholders in Tata Investment Corp must be laughing all the way to the bank right now. The stock is up a huge 33% in the last one week whereas the gains over the last three months and the last one year stand at 75% and 83% respectively. This is almost double the returns earned by the BSE Smallcap index and quite good to be honest.
If one looks up on the internet for the possible reason behind the rise, there's nothing significant that shows up. The company's recent quarterly results have also been business as usual. Both the topline and the bottomline have grown at around 15% YoY for the September quarter.
Not bad but not extraordinary either. On closer inspection, we came across an article on Bloomberg that attributes the sudden spurt in the stock price to the upcoming IPO of Tata Technologies. However, the line below the title of the article puts you off.
It says that Tata Investment Corp owns just 0.33% stake in Tata Motors, which is the promoter of Tata Technologies and the biggest selling shareholder in the IPO. The article does not have details on whether the meteoric rise in the company's share price due to the IPO of Tata Tech is justified. So, let's do some back-of-the-envelope calculation.
Going through the annual report of Tata Investment Corp, we found out that the company owns 11 million shares in Tata Motors, which indeed amounts to a 0.3% stake in the company. Tata Motors in turn owns 75% in Tata Technologies, one of the most awaited IPOs in recent times. Now, there are talks that the IPO may list at a whopping 70% premium to its upper price band of ₹500 per share.
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