I passed an exam with the highest score even though I didn’t study anything on the subject.
This just seems stupid, right? Because there is no way I can excel in class without studying.
Likewise, if I told you that a huge losing company could give you high returns, you wouldn’t believe me…
Now, what if I told you my best friend sat in front of me on that audition, and she was really a genius?
Likewise, the losing firm offers high returns because the firm is an arm Very profitable conglomerateThings turn slowly.
Now that’s believable, isn’t it?
In the example above, I’m talking about Tata Teleservices. The stock has already grabbed several headlines by delivering huge returns despite reporting losses.
In the past year, Tata Teleservices’ share price has increased by 263 percent.
In the past week, its share price has soared by a whopping 31 percent.
Take a look at the chart below.
But why is Tata Teleservices’ stock price rising despite the losses? Does the market know something that retail investors don’t?
Read on to find out…
#1 Effect of 5G
In June 2022, Tata Teleservices entered into a contract with Japanese chip maker Renesas Electronics Corp.
It will bring the contract between two leading companies closer, resulting in many benefits.
When the collaboration was announced, Tata Sons President – N Chandrasekaran said-
“We see great potential in collaborating with Renesas in areas such as automotive electronics and current and future communication networks. This collaboration will accelerate our presence in these areas in India as well as globally.”
This news reinforced speculation about Tata Group’s ambitious plans in the telecommunications sector.
Tata Group is expected to gain some benefits from the development of the 5G sector in India as it plans to introduce telecom equipment through Tata Teleservices.
Thus, investors are optimistic that the change from 4G to 5G will benefit Tata Teleservices.
#2 Improve Finance
Tata Teleservices is at a knee deep loss. However, losses have decreased recently.
For FY 2022, Tata Teleservices reported a loss of Rs 12,150 million which is 39 per cent lower compared to last year’s loss of Rs 19,967 million.
The company’s operating profit has also increased significantly over the past four years.
#3 Buy FII
Could be another reason Buying shares of fish industries companies At Tata Teleservices.
It is believed that when FII invests in a company, something good is about to happen to the company.
FIIs have been investing their stake in Tata Teleservices since September 2021. FII’s share stood at 0.01% in the quarter ending September 2021.
Their share increased to 2.4 percent by the end of June 2022.
#4 Family Support
No matter how bad the child is, the family never abandons the child. The same thing happened with Tata Teleservices. When I faced a shortage of cash, I got a letter of support from Tata Sons. Tata’s sons pumped a lot of money.
A transformation strategy is being implemented at Tata Teleservices. It is being revived in a new avatar called Tata Tele Business Services (TTBS).
Hence, the support of the Tata Group has boosted the near-term growth prospects for Tata Telephone Services.
Ready Meals for Investment
Reducing losses and bright growth prospects are positive signs for Tata Teleservices.
It appears that Tata Teleservices is slowly transforming its business. Thus, the market believes that the company will be profitable in the future.
The Tata Group is known for its shareholders who never disappoint. Hence, when a company operates under the Tata brand name, investors expect the company to do very well in the future just like TCS and Tata Elxsi.
Hence, investors seem to jump at the opportunity to buy a Tata Penny Collection.
However, value investors will do well and walk away from the company because it is still a money-losing company. Investing in a losing company is in return for investing in value.
Losses have diminished, but they are still huge. Out of the past 83 quarters, Tata Teleservices has only posted a net profit in the last two quarters!
Hence the investor should make a careful analysis of the risks and rewards before making any decisions regarding Tata Teleservices.
Disclaimer- This article is for informational purposes only. It is not a stock recommendation and should not be treated as such.
This article was published by Equitymaster.com.
(Except for the headline, this story has not been edited by the NDTV crew and is published from a syndicated feed.)