This notable uptick in share value followed investor enthusiasm spurred by the company’s strategic decision to demerge its commercial and passenger vehicle segments into two distinct listed entities. This move aims to enhance the company’s ability to capitalise on growth opportunities effectively.
On Monday, the company approved a demerger proposal for Tata Motors, splitting it into two distinct listed entities. The first entity will encompass the Commercial Vehicles business and its associated investments, while the second will include the Passenger Vehicles segment, consisting of PV, EV, JLR, and their related investments.
Also Read: RBI bars IIFL Finance from disbursing gold loans with immediate effect; shares locked in 20% lower circuit
Over the past few years, the Commercial Vehicles (CV), Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) businesses of Tata Motors have delivered a strong performance by successfully implementing distinct strategies. Since 2021, these businesses have been operating independently under their respective CEOs, the company said in its exchange filing.
The demerger will be implemented through an NCLT scheme of arrangement, and all shareholders of Tata Motors shall continue to have identical shareholding in both of the listed entities.
Commenting on the company’s demerger plan, Mr Ashwin Patil, Senior Research Analyst at LKP Securities, said,” The announcement of demerger between the two businesses of Tata Motors into CVs and PVs shall split the business value into half and should enable a focused approach and flexibility. Also, the synergies are lacking in both businesses, which explains the move.”
Their volume performances, margins, drivers, and competitors are totally diverse. Therefore, it is a smart move from the company, which has been on the anvil for a while now.
From a competitive point of view, he said that the PV business can now directly compete with the market leader, Maruti, with global ammunition in the form of JLR and bridge the gap on the valuation front.
Also Read: Tata Motors demerger: Will shareholders witness value unlocking? Analysts assess impact
With Hyundai’s listing on the cards and M&M as the fourth rival, the tussle in the PV space will be interesting to watch and can give an investor a fair choice to select between the four of them, he pointed out.
On the CV front, Ashwin Patil said that Tata Motors will compete straightaway with pure-play domestic player Ashok Leyland. He believes better cash utilisation should add to the positive sentiments.
“Since it’s an equal split, we can’t take a call on valuations. We stay positive on the stock,” he added.
Stellar Rally
Over the past year, the company’s shares have been on a steady upward trajectory, buoyed by notable improvements in its Jaguar and Land Rover as well as commercial vehicle businesses. Following seven consecutive quarters of losses, the company pivoted to a net profit in Q3 FY23, a trend that continued in subsequent quarters, fueling an exceptional rally in its stock price.
Also Read: Tata Motors business divisions come to a fork in the road
After concluding CY23 with a multi-bagger return of 101%, making it the only Nifty 50 stock to achieve this feat in the year, the positive momentum continues into CY24, with the stock already delivering an impressive return of nearly 36%.
Considering the stock’s low price of ₹79.60 apiece on May 20, it has surged an astounding 1193% to trade at the current market price of ₹1030 apiece. Remarkably, the stock has closed in the green for 9 out of the last 11 months, delivering an exceptional return of 145%.
Disclaimer: We advise investors to check with certified experts before making any investment decisions.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it’s all here, just a click away! Login Now!
Download The Mint News App to get Daily Market Updates.
More
Less
Published: 05 Mar 2024, 09:25 AM IST
Ananya Das is your guide to the latest trends, viral sensations, and internet phenomena. Based on a keen understanding of digital culture, Sophie navigates the ever-evolving landscape of trending topics. With an insightful and engaging approach, she explores what’s buzzing across social media platforms, ensuring readers stay in the loop with the most talked-about and shareable content online.
