 "Tata Motors tops Rs 1,000; surges 5% on demerger plan of CV, PV businesses")
Shares of Tata Motors jumped nearly 5 per cent on BSE to cross the Rs 1,000-mark, scaling a new high in Tuesday's intra-day trade. The stock rose to a fresh high of Rs 1,031.70 after the company announced the demerger of its business verticals into two separate listed companies.
One entity will house the commercial vehicles (CV) business and its related investments, while the other will encompass the passenger vehicles (PV) businesses, including domestic PV, electric vehicle (EV), Jaguar Land Rover (JLR), and their related investments. Tata Motors made the announcement on Monday after market hours.
At 09:17 am; Tata Motors was trading 3 per cent higher at Rs 1,013.65, as compared to a 0.35 per cent decline in the S&P BSE Sensex. Tata Motors DVR too hit a new high of Rs 695.05, as they rallied 5.3 per cent on the BSE in intra-day trade.
The demerger shall be executed through a National Company Law Tribunal (NCLT) scheme of arrangement. All Tata Motors shareholders will maintain identical shareholding in both the listed entities.
The NCLT scheme of arrangement for the demerger will be presented to the Tata Motors board of directors for approval in the coming months, and it will be subject to necessary shareholder, creditor, and regulatory approvals, which could take an additional 12-15 months.
Over the past few years, the CV, PV+EV, and JLR businesses of Tata Motors have delivered a strong performance by successfully implementing distinct strategies.
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Tata Motors management said the company has scripted a strong turnaround in the last few years. The three automotive business units are now operating independently and delivering consistent performance.
This demerger will help them better capitalise on the opportunities provided by the market by enhancing their focus and agility.
This will lead to a superior experience for the company’s customers, better growth prospects for its employees and enhanced value for shareholders, the management said.
This will lead to a superior experience for the company’s customers, better growth prospects for its employees and enhanced value for shareholders, the management said.
On the back of a strong performance across its key business segments, the stock has significantly outperformed key indices with 204 per cent return in the last 36 months vs. around 50 per cent return in the Nifty.
While the demerger seems to be a step in the right direction, Motilal Oswal Financial Services said they do not foresee any need to revisit its target price, which is already based on SoTP valuation.
“Moreover, despite factoring in most of the positive triggers in our estimates, we get limited upside given the recent sharp run-up in the stock,” the brokerage said.
“Moreover, despite factoring in most of the positive triggers in our estimates, we get limited upside given the recent sharp run-up in the stock,” the brokerage said.
Domestic CV & PV industry have witnessed healthy demand recovery over the past couple of years (post-Covid) and is likely to consolidate at present levels in the near term driven by high base as well as impending union election, analysts at ICICI Securities said in their Q3FY24 result update.
The company’s focus in the interim is to further improve upon the profitability in this space amidst its proven capabilities across powertrains (ICE, CNG, Electric, Hydrogen, etc) and guidance for double digit EBITDA margins.
On the EV side, it plans to build upon its leadership position in E-PV space with a target to sell 1 lakh E-PVs in FY25 and is also a prominent player winning orders in CESL E-bus tenders, the brokerage had said.
On the EV side, it plans to build upon its leadership position in E-PV space with a target to sell 1 lakh E-PVs in FY25 and is also a prominent player winning orders in CESL E-bus tenders, the brokerage had said.