Tata Motors Valuation Analyzed

Tata Motors’ business, including its electric vehicles and Jaguar Land Rover, is currently valued at approximately ₹1.45 trillion. This is significantly lower than its value before the company split into separate businesses. This change impacts investor confidence and future growth strategies.

Key Points

• Tata Motors valuation down 40% post-demerger, at ₹1.45 trillion.
• Nomura predicts ₹365 for CV, ₹367 for PV businesses.
• GST cut boosts PV sales, especially for SUVs like Punch & Nexon.
• CV business forecasts 5% growth, driven by GST reduction & Iveco.
• Iveco acquisition financed with debt, minimal equity impact initially.
• PV business inclusion in indices will remain, while CV may change.

The split was designed to allow each business to grow independently. The PV business is particularly sensitive to changes in consumer demand. Recent data shows strong interest in models like the Harrier EV, with high initial bookings.

Analysts at Nomura believe that the Goods and Services Tax (GST) cut implemented on September 22nd will further stimulate sales of the PV business. This is especially true during the festival season and with existing customer demand. Premium SUVs, such as the Punch and Nexon, are seeing significant interest.

Furthermore, the company’s commercial vehicle (CV) division anticipates around 5% growth in revenue over the next few years. This projection is based on the positive impact of the GST reduction and the acquisition of Iveco. The Iveco deal is primarily financed with debt.

However, Nomura has not yet incorporated the value of the Iveco acquisition into its projections. Tata Motors is forecasting a solid growth rate of 5% in revenue over the 2024-2028 period, coupled with improved profit margins.

A critical consideration is the impact of this demerger on Tata Motors’ inclusion in major stock market indices. Nuvama Institutional Equities predicts the CV business will be removed from the Nifty and Sensex, while the PV business will maintain its place.

Ultimately, the success of Tata Motors’ individual business units will hinge on their ability to execute their strategies and adapt to evolving market conditions.