Tata Steel's market capitalisation slips below Titan among group firms

M-cap falls 11% in 2 weeks to Rs 1.32 trn, against watchmaker's Rs 1.41 trn

As the rally in metal stocks loses steam, Tata Steel’s market capitalisation has once again fallen below that of Titan Company. Earlier this month, the steel major overtook Titan to become the second largest company in the Tata Group after Tata Consultancy Services (TCS).

On Thursday, Tata Steel closed with a market capitalisation of around Rs 1.32 trillion against Titan’s m-cap of Rs 1.41 trillion. In the last two weeks, Tata Steel has lost nearly 11 per cent of its m-cap after hitting an all-time high of Rs 1.48 trillion on May 11. In the same period, Titan’s m-cap rose 11 per cent. TCS remains the group’s crown jewel with m-cap of Rs 11.76 trillion, accounting for nearly 70 per cent of the group’s combined market cap.

Titan, a relatively smaller company in terms of revenues and assets, first overtook Tata Steel’s m-cap in March 2015. (See the adjoining chart)

The recent decline in Tata Steel’s share price has been attributed to a softening of steel prices after Chinese authorities warned metal producers in the country against pushing up prices. China’s National Development and Reform Commission (NDRC) urged the firms to maintain “normal market orders”. This led to a global decline in metal prices, including of steel. China is the world’s largest consumer of steel, accounting for nearly 55 per cent of global demand.

Titan, on the other hand, has gained thanks to a rally in gold prices, which is expected to boost revenues and profits of its jewellery division, which accounted for 89 per cent of its consolidated revenues in financial year 2020-21 (FY21). Gold prices have shot up nearly 12 per cent in the past two months and the price of the yellow metal is close to a four-month high.

Titan is also expected to gain from the government’s recent move to make gold hallmarking compulsory. Thanks to this, the company is expected to raise its share in the fragmented jewellery market.

However, despite the recent decline, Tata Steel remains one the best performing companies in the group after the nationwide lockdown.

At the end of September, it was ranked fifth in terms m-cap among group companies after TCS, Titan, Tata Consumer, and Tata Motors. Tata Steel’s m-cap has risen 357 per cent since the end of last March, against a 69 per cent rally in Titan’s shares.

The company’s financial performance in FY21 was among its best in recent years, raising hopes of a sustained turnaround after years of poor performance. The company has reported a net loss in five out of the last 10 years.

Tata Steel’s net profits in FY21 were up nearly 6X to Rs 8,190 crore from Rs 1,172.5 a year ago. The company also managed to cut its debt by around 20 per cent and stepped up its dividend payout for the first time in over a decade. It plans to pay a total dividend of nearly Rs 3,000 crore to its shareholders in FY21 against a pay-out of Rs 1,146 crore in FY20.

In contrast, dividend pay-out by Titan remains unchanged at Rs 356 crore. The jewellery and watchmaker suffered a loss in revenues and profits in FY21 due to the lockdown. Its revenues and profits are once again expected to suffer in FY22 due to the second wave.

Historically, Tata Steel has always been among the biggest companies in the Tata Group in terms of m-cap, revenues, and profits. 

However, its fortunes began to decline after 2010 because of a sharp decline in the profitability of its European operations, which it acquired in 2007. The company was hit by a sharp rise in debt after the acquisition.

First it lost out to Tata Motors in terms of revenue in FY11 and then in March 2015 Titan beat it to become the third biggest firm in the group in terms of m-cap.

Tata Steel is now the second biggest company in the group in terms of total assets and borrowings after Tata Motors. The company had total assets worth nearly Rs 1.84 trillion and gross debt of around Rs 0.82 trillion at the end of March.