Tata Motors, the global vehicle maker, saw its shares soar 8% in today’s early session, exceeding the critical milestone of ₹1000 and reaching ₹1065.60 per share.
This significant increase in share value followed investor enthusiasm sparked by the company’s strategic decision to split its commercial and passenger car sectors into two separate listed corporations. This change is intended to improve the company’s capacity to capitalise on growth possibilities efficiently.
On Monday, the corporation accepted a demerger plan for Tata Motors, dividing it into two separate publicly traded firms. The first entity will contain the Commercial Vehicles company and its associated assets, while the second will include the Passenger Vehicles sector, which includes PV, EV, and JLR, as well as related investments.
Tata Motors’ Commercial Vehicles (CV), Passenger Vehicles (PV+EV), and Jaguar Land Rover (JLR) divisions have performed well in recent years thanks to the effective implementation of various strategies. According to the company’s exchange registration, these firms have been operating separately since 2021, led by their individual CEOs.
The demerger would be completed under an NCLT plan of arrangement, and all Tata Motors shareholders would retain identical shareholdings in both listed businesses.
Mr. Ashwin Patil, Senior Research Analyst at LKP Securities, commented on the company’s demerger plan, saying, “The announcement of the demerger of Tata Motors’ two businesses into CVs and PVs shall split the business value in half and should enable a focused approach and flexibility.” Also, synergies are weak in both industries, which explains the decision.”
Their volume performance, margins, drivers, and rivals are completely different. As a result, the corporation has made a wise decision that has been in the works for some time.
From a competitive standpoint, he stated that the PV industry can now directly fight with the market leader, Maruti, with global ammunition in the shape of JLR, therefore closing the valuation gap.
With Hyundai’s IPO on the horizon and M&M joining the fray, the battle for the PV market will be fascinating to watch and provide investors with a fair choice between the four, he noted.
On the CV front, Ashwin Patil stated that Tata Motors will compete directly with pure-play local manufacturer Ashok Leyland. He feels that better cash management should contribute to the good attitude.
“We can’t make a valuation assessment since there is an equal split.”We remain bullish on the stock,” he continued.
Stellar Rally
Over the last year, the company’s shares have steadily risen, aided by noteworthy gains in its Jaguar and Land Rover, as well as commercial vehicle operations. Following seven consecutive quarters of losses, the firm turned a net profit in Q3 FY23, a trend that persisted in future quarters, sparking an extraordinary surge in its share price.
After finishing CY23 with a multi-bagger return of 101%, making it the first Nifty 50 company to do so, the bullish momentum has carried over into CY24, with the stock already providing an amazing return of about 36%.
From a low of ₹79.60 per share on May 20, the stock has increased by 1193% to its current market price of ₹1030. Surprisingly, the company has finished in the green for 9 of the previous 11 months, resulting in an amazing return of 145%.
Your article helped me a lot, is there any more related content? Thanks! https://accounts.binance.com/en/register?ref=JHQQKNKN