Tata Group's Most Profitable Companies

Do you know that there are 5 companies in Tata Group that generate around 98% profit for the entire group? And by default, you must have thought, "Oh, so these 5 companies have the best revenue". But sorry to burst your bubble. Revenue isn't the only factor to consider in a company's profitability.

Many people (including you) fail to realise that total revenue (after tax) or total sales of a company are not the only metrics to measure a company's success. Several others are present to analyse any company's profitability.

So, to make things easier for you, we'll be discussing some companies of the Tata group based on their profitability from highest to lowest.

Also, a quick disclaimer. Please do not run to invest in the companies that we've mentioned here. These companies are mentioned to help you understand how these metrics work. So. let’s begin the lesson, guys.

Table of Content:

a. Operating Margin

b. Net Profit

c. Net Margin

a. Operating Margin

Imagine you run a chai ki tapri, and you sell a cup for ₹10. To make that one cup of chai, you spend ₹4 of that on milk, tea leaves, sugar, and gas as a direct cost. And, after covering these direct costs, you're left with ₹6, i.e. 60%. This 60% is your operating margin. In short, it's the money left after paying for the basic materials required to make and serve chai.

The operating margin shows how much profit a company earns from each rupee of sales after covering production costs like:

• Wages
• Raw materials

But before paying interest or taxes. A higher operating margin is usually better because it means the company is efficient at making profits from its sales.

Tata Group has several companies that are doing great in terms of operating margins. Here's a list of the top 5:

1. Tata Investment Corporations

Tata Investment Corporation Limited, often referred to as TICL is a well-known player in the world of finance in India. Founded way back in 1937, it started as The Investment Corporation of India Limited and became publicly listed in 1959, making it one of the few publicly held investment companies of that time listed on the Stock Exchange, Mumbai.

TICL focuses on making long-term investments across a variety of sectors, including

• Banking
• Healthcare
• Infrastructure
• Consumer goods

They invest in everything from stocks to bonds, aiming to diversify their portfolio while providing good returns to their shareholders.

In FY24, TICL achieved an operating margin of 91.17%, becoming the top Tata Group company to excel in operating margin performance for the year. It achieved sales of ₹38,312.19 crores and EBITDA of ₹41,765.70 crores.

Oh, by the way, it is also one of the five companies that generate 98% of the total profits for Tata Group (remember we talked about this above?). We've covered the other four companies as well. Keep reading to find out who they are👇🏻

2. Tata Teleservices Ltd.

Originally founded as Hughes Tele.com in 1995, Tata Teleservices, along with its subsidiary Tata Teleservices (Maharashtra), is an internet service provider and IT services company. Headquartered in Mumbai, Tata Teleservices has been known for its innovative approach. It was the first private operator to launch 3G services in India back in 2010.

In terms of operating margin, Tata Teleservices achieved an operating margin of 44.26% in FY24, ranking it 2nd in the list of Tata’s top 5 companies with the best operating margin. It generated sales of ₹1,191.65 crores and EBITDA of ₹677.86 crore. However, its net margin isn't that impressive. In FY24, it achieved a net margin of -103.09%.

3. Benares Hotels

You probably wouldn’t have heard about Benaras Hotels. It's truly an underrated company of Tata. We associate Banaras with simplicity and spirituality, but Benares Hotels adds a touch of luxury to the city.

Founded in 1971, the company operates several notable hotels, including the luxurious Taj Ganges and the historic Nadesar Palace, both located in Varanasi. Additionally, they manage the Ginger Hotel (earlier known as the Gateway Hotel) in Gondia, Maharashtra.

In 2011, Benaras Hotels became a subsidiary of The Indian Hotels Company Limited, which is part of the Tata Group. The Taj Ganges and Nadesar Palace together offer a total of 144 rooms; meanwhile, Ginger Hotel offers 34 rooms of accommodation.

It ranked third in the Tata Group of companies in terms of operating margin achieving an operating margin of 42.41% with sales of ₹120.56 crores and EBITDA of ₹57.03 crores in FY24.

4. Indian Hotels Company Ltd. (IHCL)

Let's be honest, we all had a childhood dream of staying in the iconic Taj Hotel after getting rich. But do you know who manages our favourite Taj Hotel and other groups of Hotels? Its Indian Hotels Company Limited (IHCL), a leading name in the hospitality industry in India, known for its rich heritage and commitment to exceptional service.

Founded in 1902 by Jamsetji Tata, IHCL opened its first hotel, the iconic Taj Mahal Palace in Mumbai, in 1903. This marked the beginning of a journey that has now spanned over 120 years, making IHCL one of the oldest and most respected hotel chains in the country.

Today, IHCL operates a diverse portfolio of 263 hotels across four continents and 12 countries and in over 100 locations. Their offerings include several well-known brands, such as

• Taj, which caters to luxury travellers
• Vivanta, which focuses on upscale experiences
• SeleQtions, a collection of unique hotels
• Ginger, which aims to provide affordable yet stylish accommodations.

This variety allows IHCL to appeal to a wide range of guests, from business travellers to vacationers.

It generated an operating margin of 31.87% with sales of ₹4,405.60 crores, ranking 4th in the list. Its EBITDA was ₹2,611.43 crores in FY24.

5. Tata Elxsi

Tata Elxsi is a prominent player in the design and technology services sector, established in 1989. Headquartered in Bengaluru, India, the company specialises in providing product engineering and design services across various industries, including healthcare, pharma, transportation, and media & communications.
It has a global presence at more than 35 locations in 15 countries.

Tata Elxsi helps clients by providing technological services such as the Internet of Things (IoT), Artificial Intelligence (AI), Virtual Reality, and Cloud Mobility.

With an operating margin of 29.48% and sales of ₹3,552.15 crores in FY24, Tata Elxsi ranks last in the list of performance of the Tata Group of companies in terms of operating margin.

Key Takeaways:

It is noted that the Benares Hotels and Indian Hotels Company Ltd. (IHCL) stand out in the hospitality sector, achieving impressive operating margins of 42.41% and 31.87%, respectively. Infact, the Benares Hotels is the second least revenue generating company of Tata Group. Despite less revenue generation, it has achieved a good operating margin. This again proves that revenue or profit alone cannot tell the profitability of a company.

Let's look into some more factors that determine profitability.
Moving on to the next profitability margin.

b. Net Profit

Let’s understand net profit through an example of an auto rickshaw driver. He earns ₹1,000 in a day by ferrying passengers. However, he spends ₹300 in fuel, ₹100 for daily maintenance, and ₹200 for loan EMIs on the rickshaw. After accounting for all these expenses, he is left with ₹400. This ₹400 is the actual money in hand after covering all the expenses. Its called the net profit.

In formal terms, net profit is the amount of money a company keeps as profit after covering all its expenses, including

• Operating costs
• Taxes
• Interests

It shows what percentage of a company's revenue turns into actual profit. It is considered to be one of the most important indicators to measure a company's financial health.

Let's look at these top 5 companies of Tata Group that have performed exceptionally well in terms of net profit in FY24. And you'll find the other four horsemen of the 98% profit generation club. 😉

1. Tata Consultancy Services

So, this list begins with none other than TCS! We all know at least one didi/bahiya who joined TCS as their first company after graduating from engineering college. TCS, or Tata Consultancy Services, is one of the largest and most reputed IT services companies in the world.

Founded in 1968, TCS now operates in 55 countries across the world providing a wide range of services including IT consulting, business solutions, and outsourcing.
In terms of net profits, it has the best performance in Tata Group. It has achieved a net profit of ₹46,099 crore along with sales of ₹ 2,40,893 crore. It generated an EBITDA of ₹69,281 crore.

2. Tata Investment Corporation Ltd.

TICL has managed to be in the top 5 companies of the Tata group in terms of all three profitability margins. It generated a net profit of ₹38,496 crore and sales of ₹38,312.19 crore.

3. Tata Motors

At number 3 on this list, we have none other than Tata Motors who gave us some of the most popular car models like Indica and Sumo. Tata Motors is a major player in the automotive industry in India known for its wide range of vehicles and innovative solutions.

Founded in 1945 as Tata Engineering and Locomotive Company (TELCO), the company initially focused on manufacturing locomotives before expanding into the automotive sector.

It generated a net profit of ₹31,806.75 crore. It generated sales of ₹4,37,927.77 crore and EBITDA of ₹86,808.56 crore.

4. Titan

We all have watched atleast one Titan ad at some point in our lives. Titan is the “It” brand when it comes to luxury watches and accessories. Titan Company Limited is a well-known name in the lifestyle and fashion accessories market in India. Established in 1984, it began its journey as Titan Watches Limited, a joint venture between Tata Industries and the Tamil Nadu Industrial Development Corporation (TIDCO).

Today, it has grown to become a prominent name in the watch and jewellery segment. Its headquarters is located in Bengaluru.
However, it isn't really a prominent player in terms of net profit. It generated a profit of ₹3,496 crore with sales of ₹51,084 crore and an EBITDA of ₹5.876 crore.

5. Tata Power

Tata Power Company Limited is a leading electric utility and electricity generation company in India. Founded in 1910 as the Tata Hydroelectric Power Supply Company, it has grown to become one of the largest integrated power companies in India, with an installed capacity of over 14,600 MW. 5847 MW out of this is sourced from non-conventional sources like solar and wind energy.

It operates across various segments that include electricity generation, transmission, and distribution.
In terms of profits for Tata Group, Tata Power has generated ₹2,229.86 crore with sales of ₹20,093.36 crore and EBITDA of ₹14,570.18 crore.

Key Takeaways:

Not companies are performing quite well not just in terms of net profit but also in terms of revenue. Tata Motors (₹437927.77 crore), TCS (₹240893 crore), and Titan (₹51084 crore) are among the top 5 most revenue-generating companies of Tata Group.

But we're not done yet. There's one more margin left to cover. Let's look into it.

c. Net Margin

Okay, now let's understand what net margin is with the help of a mithai wala. He earns ₹1,00,000 in sales during the festive season. After deducting ₹80,000 in costs (ingredients, packaging, staff wages, and rent), he is left with ₹20,000 as profit. Basically, for every ₹100 he earns, he's left with ₹20, i.e. 20% as profit. That's what the net margin is.

Net margin is the percentage of revenue retained as profits after all costs. It shows how much of the revenue becomes actual profit but in percentage.

In Tata Group, these companies are performing the best in terms of net margin:

1. Tata Investment Corporations

Tata Investment Corporation tops the list of net margin as well, with a 100.48% net margin in FY24. I think you might have identified a pattern here. TICL has consistently managed to make its place in all these factors. It is because TICL earns its profits through investment returns, focusing on long-term growth rather than short-term gain.

2. Benaras Hotels

In this list, Benaras Hotels ranks second with a net margin of 29.90% in FY24. Although its revenue is the second lowest in the entire Tata Group (₹0.0001 crore), it's performing well in terms of both operating margin and net margin.

3. TRF Ltd.

Tata TRF Limited, also known as TRF, is a key player in the material handling and engineering sector in India. It was established in 1962 and is located in Jamshedpur. Its manufacturing unit spans approximately 22 acres of land. providing turnkey solutions for bulk material handling systems for industries like power, steel, cement, fertilisers, and mining.

It operates across 3 main business units:

• Bulk Material Handling Equipment
• Bulk Material Handling Systems
• Life Cycle Services

TRF ranks third on the list of best-performing Tata Group companies in terms of net margin. It recorded a net margin of 28.28% in FY24 generating a sales of ₹32.7 crores and an EBITDA of ₹14.51 crores. Despite its lowest revenue in the entire group (₹0.0000293 crore), it still managed to be placed in top 5 companies having the best net margin.

4. Tata Technologies

Founded in 1989 as an automotive design unit of Tata Motors, Tata Technologies is now a prominent name in the engineering and product development sector. It became a standalone entity in 1994. Headquartered in Pune, it specialises in providing innovative engineering solutions primarily for the automotive and aerospace industries, along with industrial machinery and consumer goods.

In FY24, it ranked fourth in net margin at 25.16% but performed well in sales and EBITDA, generating ₹5,117.2 crore and ₹558.42 crore, respectively.

5. Tata Elxsi

Tata Elxsi, mentioned fifth in the operating margin list, has ranked fifth in the net margin list as well. It achieved a net margin of 22.3% in FY24.

Key Takeaways:

As we saw previously in terms of revenue, TCS, Tata Motors, along with Tata Steel (₹229170.78 crore) are leading the race. But in terms of net margin, TICL, IHCL, and Benares Hotels are ahead, even though Benaras Hotels is generating extremely low revenue.

The Bottom Line

We discussed important metrics (operating margin, net profit, and net margin) to measure any company's profitability with the help of Tata Group's companies.

However, you also have to be aware that these metrics are not interdependent on each other. Just because a company has done a good job in terms of net margin doesn't mean that it will also generate the highest net profit.

Okay, okay, I understand that hearing and knowing about all these factors can be a bit overwhelming. But if you're new to the investment journey and don't know where to begin, you can hop on to Finology Quest for beginner-friendly guidance.

*Disclaimer: The stocks, companies, and policies discussed above aren't recommendations from Finology Insider but guest content and shall not be construed as a replacement for professional advice. Consult a professional or conduct the necessary research before making investment decisions.