This Tata group stock surged over 2,000% this year; should you buy

The coronavirus pandemic has proved a blessing in disguise for share market investors, especially for those who put money in smallcap and midcap stocks. The BSE midcap index delivered a decent return of 34% in the calendar year 2021, compared to 19.5% growth in the Sensex, which gauges the market capitalisation of the country’s top 30 stocks. The NSE Nifty surged 21.5% during this period.

Outperforming the benchmark indices, Tata Tele Business Services, formally known as Tata Teleservices Maharashtra (TTML), has delivered massive returns to its investors this year. The midcap stock, operating in the telecommunications sector, saw its shares jump more than 2,000% in the calendar year 2021, even as the company reported losses for 10 consecutive quarters.

Tata Teleservices shares surged on investor exuberance

Tata group stock Tata Teleservices spiked as much as 2,063% so far this year, from ₹7.85 on January 1, 2021, to ₹170.4 as of December 27, 2021. The stock has witnessed relentless rally even in the long term, logging 7,500% growth in two years, and 2,865% over the five-year period. The market capitalisation of the company stood at ₹33,312 crore.

Long-term investors turned bullish on this debt-laden company amid optimism over business prospects. The company is working on plans to establish itself as a digital transformation partner for India’s small and medium-sized businesses.

On Monday, Tata Tele shares hit the upper circuit of 5% to reach ₹170.4 on the BSE. The stock opened with a gain of 4.99% today while it touched a day’s low of Rs 163.40. The midcap stock has risen 10.22% over the last two sessions, while it dropped 0.5% in the last five sessions between December 21 and December 27. The stock is currently trading 10% below its 52-week high of ₹189.95, touched on December 17, 2021. The company’s shares had hit their 52-week low of ₹7.5 on December 28, 2020. The stock was trading higher than the 20-day, 50-day, 100-day and 200-day moving averages but lower than 5-day moving averages, according to stock research platform Markets Mojo.

On the volume front, there was spurt in trade as 10.35 lakh shares changed hands over the counter in the first two hours of trade, as compared to 2-week average volume of 14.40 lakh. The delivery volume of 21.38 lakh on December 24 has surged by 53.88% against 5-day average delivery volume, which indicates higher investor confidence, as per data available on Markets Mojo.

As per the analyst platform, Tata Teleservices turned bullish from mildly bullish on October 18, 2021 at ₹55.50. The stock was trading risky as compared to its average historical valuations with a negative book value, which means the company has more total liabilities than its total assets.

Firm suffered 10th consecutive loss in September quarter

Tata Teleservices, which offers a comprehensive portfolio of information and communications technology (ICT) services for businesses, suffered losses for the tenth quarter in a row. For the second quarter ended September 2021, the company reported a narrowing of losses to ₹313.6 crore as compared to a loss of ₹341.1 crore in the year-ago period. The total income stood at Rs 271.33 crore, up 4.6% from the prior year period.

The accumulated losses of the company during the September quarter exceeded its paid-up capital and reserves. However, Tata Tele is confident of its ability to meet the funds requirement and to continue its business as a going concern on the back of strong support from its promoter Tata group. The company in its September quarter earnings report said that it had obtained a support letter from its promoter to organise for any shortfall in liquidity during the period of 12 months from the balance sheet date.

As per the latest shareholding pattern available on the exchange, Tata group companies held a combined 74.36% holding in TTML. Apart from promoters, TTML is almost completely held by retail investors, who own 23.22% shareholding in the company.