Why this loss-making company's stock has surged over 1,500% in 8 months
2 min read 30 Jun 2021, 12:00 PM ISTThe stock has hit the upper circuit for 27 consecutive sessions since 25 May 2021, and during this period it has advanced over 261%
PremiumMumbai: Quarterly losses and rising debt over the years notwithstanding, Tata Teleservices Maharashtra Ltd's (TTML) stock has surged nearly 1,500% in the last eight months as the company's prospects look bright going ahead.
The scrip climbed to an all-time high of ₹44.60 from ₹2.75 a share hit on 16 October 2020, a rise of 1521%. The stock has hit the upper circuit for 27 consecutive sessions since 25 May 2021, and during this period it has advanced over 261%. Year to date, it has increased 461%.
Corporate database, Capitaline, data shows it has quarterly earnings data for the company since 2009 and Tata Teleservices has reported profit only for two quarters -- March 2019 and June 2016. For rest of the quarter --. 47 out of 49 -- it has reported losses.
As of fiscal year 2021, the firm had total debt of ₹17,774.47 crore.
According to an ET report on 25 May, Tata Sons is reviving Tata Teleservices in a new avatar called Tata Tele Business Services (TTBS), which will cater to small and medium enterprises. TTBS has launched Smartflo, a cloud-hosted communication platform targeting SMEs that have a hybrid work culture where people work from home and remote locations. Smartflo can be accessed through mobile phones and desktops.
A Business Standard report suggests that Tata Group is looking at reviving Tata Teleservices by taking technical expertise and enterprise solutions for its Super App, which is being built. The app, likely to be launched by December this year, is expected to bring all the Tata Groups products as well as services under one platform and enable sales to consumers directly.
In 2020, Tata Sons had written off its investment of ₹28,600 crore in Tata Tele. Its consumer mobile operations transferred to Bharti Airtel in July 2019.
The recent report from Care Rating has reaffirmed its rating on its long-term and short-term bank facility and instruments on the company. The rating agency said the continuous support from its promoter Tata Sons indicates that it will take all necessary actions to organize any shortfall in liquidity for the ensuing 12 months. CARE also notes the improvement in operating performance of the entity in FY21 post demerger of consumer mobile business.
Till June 2019, Tata Sons had infused about ₹46,595.05 crore in TTML and its associate Tata Teleservices Limited (TTSL). The entities continue to be integral to Tata Group as demonstrated by consistent support from Tata Sons. The financial flexibility enjoyed by TTML continues to be highly favorable despite no further fresh infusion of funds post-June 2019, the rating firm said.
“Strong support from its parent company Tata Sons to support any shortfall in liquidity and improvement in FY21 operational performance post demerger of its consumer mobile business are key positive factors of the company. The parent company’s focus to revive its telecom business 'Tata Teleservices' which will cater to high potential SME segment through its cloud based platform Smartflo" said Ankit Pareek, research analyst, Choice Broking.
