Tata Motors weighs dividend after Dec quarter turnaround
Board to meet on 12 May to consider the first dividend from the company since 2016
Tata Motors Ltd may declare a dividend for the first time since 2016, as the company returned to profitability in the December quarter after two consecutive years of losses. The move will be a significant milestone in its turnaround journey, spearheaded by Tata Sons chairman N. Chandrasekaran, who has worked to strengthen, transform and unlock the value of the group’s core businesses, including the flagship Tata Motors and its UK-based subsidiary Jaguar Land Rover.
The company told stock exchanges on 4 May that its board will meet on 12 May to consider declaring dividend for shareholders.
In 2016, Tata Motors last declared dividend of ₹0.2 a share.
The automaker’s decision to unlock value in non-core businesses, such as Tata Technologies, as part of its turnaround goals has been well-rewarded by the Street.
Since Tata Tech filed its draft IPO papers with Securities and Exchange Board of India in March, Tata Motors’ share price has appreciated nearly 25%. It will be the first Tata group company to go public in two decades.
Tata Motors announced its plan last December to take Tata Technologies, an engineering and digital services company, in which it holds a 75% stake public, and to use the cash flow the IPO will generate to achieve its debt reduction target. The company aims to be net-debt free in the automotive business by the end of the current financial year.
“The IPO proceeds would aid in further deleveraging Tata Motors’ balance sheet. While the company is still likely to miss its net-zero automotive debt targets, it will aid in unlocking value in its subsidiaries,” Jay Kale, senior vice president at Elara Capital said.
Tata Motors’ Turnaround 2.0 project, which began in 2019, is manifesting itself as the company has managed to achieve a double-digit market share in the domestic passenger vehicle business on a sustainable basis.
The company’s market share in the sport utility vehicle (SUV) segment has grown over four times in the last five years, whereas its overall passenger vehicle market share has doubled. It has also reinforced its electric passenger vehicle portfolio with affordable products and retained its market dominance with the Nexon EV, besides raising £1 billion from TPG, even as JLR volumes outperform its own guidance while commercial vehicle sales ride a cyclical upswing to potentially beat pre-covid-19 peak.
“We can see all the pieces come together for Tata Motors: a cyclical recovery in commercial vehicles, with the company focusing on profitability by pulling back discounts, maintaining a consistent double-digit PV market share, unlocking value in its subsidiaries, the fact that the capex for its EV business will be funded by the investment they’ve received eases out stress on their balance sheet and gives them good runway to grow,” Kale said.
“JLR was under pressure because of chip shortage, and we see that availability has started to significantly ease now, as reflected in the Q4FY23 volumes. JLR’s cost reduction programme has fallen into place too and its margin trajectory has consistently been positive with double-digit margins in the last five quarters. Their guidance to achieve free cash flow to the tune of 500 million pounds by the end of the year is also a positive,” he said.
“However, they might miss their net-debt zero guidance in FY24 owing to delay in JLR chip shortage recovery, which needs to be monitored. Additionally, one needs to be careful about the cyclicity of the CV business,” Kale said.
Tata Motors’ domestic commercial vehicle and passenger vehicle sales rose 35% and 45% in FY23 compared to the previous year.
Catch all the Business News , Corporate news , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High