The sharp run-up in stock price of Tata Motors has seen its market capitalisation (including Tata Motors DVR) hit a record high and cross the Rs 2 trillion mark in intra-day today.
A combined market cap of Tata Motors (Rs 1.96 trillion) and Tata Motors DVR (Rs 15,171 crore) stood at Rs 2.06 trillion, the BSE data shows. Earlier, on November 17, 2021, the combined market cap of these companies stood at Rs 1.90 trillion, according to Capitaline Plus database.
Thus far in the calendar year 2023, shares of Tata Motors and Tata Motors DVR have rallied 48 per cent, as compared to 2.8 per cent rise in the S&P BSE Sensex. Tata Motors was included in the 30-share Sensex from December 19, 2022.
The strong rally in the stock price of the company has been seen as Tata Motors is assumed to register improvement in all three of its key segments (domestic PV, CV, and JLR) on improvement in semiconductor chip supplies.
Tata Motors said Tata Commercial Vehicles (Tata CV) and Tata Passenger Vehicles (Tata PV) have been on a sharp growth trajectory Both businesses have achieved “lifetime highs” across operational and financial metrics during the financial year 2022-23 (FY23). The operational debottlenecking has done through multiple levers. The manufacturing capacity scaled up nearly 3x through interventions at the plant and at vendor end, the company said.
The CV industry is continuing to be in upcycle, fuelled by India’s growth. The industry fully emerging from the shadows of pandemic and other disruptions, Indian CV Industry continues to be in robust upward trajectory.
Last month, CRISIL Ratings upgraded its rating on the non-convertible debentures and long-term bank facilities of Tata Motors Limited (TML) to ‘CRISIL AA/Stable’ from ‘CRISIL AA-/Stable’. The rating on the short-term bank facilities, short term debt and commercial paper has been reaffirmed at ‘CRISIL A1+’.
The rating action follows the significant improvement in the credit profile on account of improved operating performance in the second half of fiscal 2023 due to strong volume growth in Jaguar Land Rover (JLR) and a stronger outlook over the medium term.
Easing semiconductor supply constraints and company entering into a long-term supply agreement for chip supply has led to stronger revenue visibility. This has led to a sharp improvement in the financial profile. Adjusted net debt to EBITDA has reduced to around 1.9 times in fiscal 2023 as per CRISIL Ratings’ estimates against 2.7 times for fiscal 2022 and it is expected to further reduce to around 1-1.2x by FY24.
The company is targeting to become net auto debt free by fiscal 2025 mainly through better operating leverage driven by improved volumes and higher margin led FCF at JLR. Further, divestment of non-core assets such as Tata Technologies could further lead help in deleveraging.
While the capex intensity is expected to remain high over the medium term (annual investment of around GBP 3 billion for JLR and Rs 7000-8000 crore in the domestic business), the debt is expected to decrease given the expected healthy cash accrual. However, high competitive intensity and risks related to technology and regulations and the company’s progress against the same would remain closely monitored.