Tata Motors drives past Maruti, becomes most valued automaker

New Delhi: Tata Motors hit a market capitalization of ₹3.15 trillion on the BSE on Tuesday, surpassing Maruti Suzuki’s ₹3.13 trillion, to become the country’s most valued automotive company after seven years.

Tata Motors’ stock has run up 9.4% in the last month, reflecting optimism emanating from a robust sales and margin performance by its UK-based luxury vehicles arm Jaguar Land Rover, as well as achieving its free cash flow targets.

In 2017, Tata Motors’ market value had reached ₹1.76 trillion, outpacing Maruti Suzuki’s ₹1.75 trillion. Maruti had gained a lead over Tata Motors in terms of market cap in 2015 ( ₹ 1.26281 trillion for Maruti Suzuki versus ₹1.2608 trillion for Tata Motors). While Tata Motors captured pole position again in 2017, it soon lost it and continued to trail Maruti until Tuesday. Bajaj Auto ( ₹2.14 trillion) and Mahindra & Mahindra ( ₹2.01 trillion), and Eicher Motors ( ₹1.01 trillion) round off the tally of the country’s top five most valued automakers. Maruti Suzuki’s stock price closed 0.3% lower at ₹9,963.5 on the BSE, while Tata Motors shares settled 2.19% higher at ₹859.25 apiece.

Brokerage JP Morgan on 8 January re-rated the Tata Motors stock with a price target of ₹925 “Our constructive view on Tata Motors is driven by expectations of strong margin and free cash flow delivery at JLR, resilient market share and margins in India passenger vehicles driven by new platform launches, and balance sheet deleveraging which should reduce EPS (earnings per share) volatility and lead to a potential re-rating,” it said in its report.

Jaguar Land Rover reported a 27% year-on-year growth in its Q4FY24 wholesales at 101,043 units, and 29% retail pick-up year-on-year, with deliveries in the UK up 55%, China 28%, Europe 27% and North America 6% on a yearly basis. Moreover, the bulk of its deliveries comprised high-margin models including the Range Rover, Range Rover Sport and Defender, accounting for over 62% of its sales in the December quarter.

Analysts expect higher sales and a favourable mix of products encompassing sales at Tata Motor’s JLR business to deliver better operating margins in its upcoming third quarter earnings, set to be announced on 2 February. “We expect JLR Ebit margin of nearly 8% in Q3FY24 from 7.3% in Q2FY24 led by higher volumes and improved mix. Our FY24 JLR volume assumptions are at 401,000 units,” a note by equity brokerage and research firm Elara Capital said.

Tata Motors’ group chief financial officer PB Balaji has said Jaguar Land Rover expects a free cash flow of 2 billion GBP for the ongoing fiscal, out of which it has already achieved 750 million GBP free cash flow in the first half of FY24. The automotive giant also benefited from the stake it sold in Tata Technologies via its initial public offer (IPO), leveraging the cash inflow to pare its debt. “India business should also witness significant debt reduction in 3Q driven by organic FCF (Rs1,000-1,500 crore) and stake sale in Tata Technologies”, the JP Morgan report added.

Tata Motors expects it will grow its electric vehicle (EV) sales by 40% in 2024, compared to last year, when it sold 69,000 EVs, led by three new products built on an all-new, and Tata Motors’ first pure-electric architecture acti.ev. The carmaker launched the Punch EV, a pure-electric version of its popular micro-SUV Punch, at a starting price of ₹11 lakh. Tata Motors will launch a clutch of ‘gen-two’ products on its acti.ev platform, including the Curvv, Harrier, Altroz and Sierra EVs, followed by the launch of its premium line of EVs based on a ‘gen-three’ premium electric platform Avinya, which will be based on a common platform between Tata Motors and Jaguar Land Rover.